Implicit Industrial Policy: The Triumph of Britain and the Failure of France in Global Pharmaceuticals

Abstract

This study illustrates a new view of industrial policy, based on the emerging organizational economics theory of the firm. Organizational economics regards the firm as a collection of skills/ capabilities embedded in a network of relations with external transactors. Industrial policy shapes the local network, thereby defining domestic firms and delimiting their skill accumulation. In the pharmaceutical industry, British regulations of safety, pricing, basic research and foreign direct investment created a demanding local competitive environment for British firms, training British firms in skills that would facilitate global competitiveness. In France, very different regulations enticed French ethical drug firms to focus on a protected local market increasingly desynchronized from the worldwide industry. Thus, industrial policy laid the ground work for the spectacular rise to global success of UK pharmaceutical firms and the corresponding failure of French firms.

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