(Illustration by Kumé Pather)
Different companies, organizations, and institutions often decide to work together to address society’s biggest problems, such as climate change, inequality, and pandemics. While such partnerships seek to weave the strengths of each party together, they inevitably face the challenge of harmonizing different missions, cultures, priorities, and revenue models to achieve a shared goal.
A new paper looks at how public and private organizations handle projects together by specifically examining the development of antimicrobial drugs over the last 25 years. A growing problem for doctors around the world, drug-resistant bacterial strains spur public demand for new antibiotics. But for-profit private companies do not have a strong incentive to invest research and development dollars on these agents, because they are unlikely to profit from such investment. Consequently, institutions oriented to the public good, such as universities, government, philanthropies, and nonprofits, are increasingly involved in funding the research.
The study’s authors—Birgul Arslan, assistant professor of innovation strategy at Erasmus University’s Rotterdam School of Management; Gurneeta Vasudeva, associate professor of strategic management and entrepreneurship at the University of Minnesota’s Carlson School of Management; and Elizabeth B. Hirsch, associate professor of experimental and clinical pharmacology at the University of Minnesota’s College of Pharmacy—specifically looked at how governments, universities, nonprofits, and companies worked together on antimicrobial drug development between 1995 and 2019, as a way to examine how the organizations collaborated and where some of the partnerships foundered.
The three researchers came together to study this question after Vasudeva visited the World Health Organization in 2019 with a delegation from her university sent to explore partnerships with international NGOs on issues of social importance. Antimicrobial resistance, she learned, was a problem the WHO was watching closely; it represented a “silent pandemic, an issue which affected millions of people around the world, but there was a problem of market failure,” Vasudeva says. Doctors were reluctant to prescribe new antimicrobial drugs out of fear that overuse would lead to more drug resistance; as a result, companies did not see the drugs as profitable. In response to this market-driven reluctance, public institutions and companies were working together on many of the drugs in the pharmaceutical development pipeline.
To test their theories about how well these partnerships worked and how efficiently they produced effective medicines, the authors analyzed all the antimicrobial drug projects moving through the discovery, preclinical, and clinical trial phases during the study period. For each drug, they broke the development into individual tasks to see how long it took for each to be completed and whether the drug moved on to the next step in the process. They also conducted extensive interviews with three experts on the roadblocks involved in developing this kind of drug and analyzed 176 drug-development contracts from a biomedical database to see how terms differed when public and private organizations worked together.
The researchers found that private companies and public institutions struggle to get as much done together as private companies working together in groups.
The study did find that the initial stages of the drug discovery process, where scientists are analyzing a vast number of organic compounds to see what works against a specific disease, agent, or condition, are better suited to a public-private partnership. However, later in the process, the diverging incentives and goals of companies and public institutions make it more difficult for them to collaborate as the drug gets closer to commercialization.
In a world where public funding is often the only money available for the development of drugs that are vital to society but have little chance of becoming blockbuster profit-drivers for companies, organizations need to be careful about how they set up partnerships. When public and private entities work on the same projects, they should import some governance and conflict-resolution ideas that are more common in private-private contracts, including joint steering committees, development milestones, and joint patent provisions, the authors write.
“The findings provide valuable insights and practical implications for fostering effective collaborations in addressing grand challenges,” says Fabrice Lumineau, a professor of strategic management at the University of Hong Kong’s Business School. He calls the paper “an exciting contribution to the field of innovation management.”
Find the full study: “Public–Private and Private–Private Collaboration as Pathways for Socially Beneficial Innovation: Evidence from Antimicrobial Drug-Development Tasks,” by Birgul Arslan, Gurneeta Vasudeva, and Elizabeth B. Hirsch, Academy of Management Journal, 2023.
Read more stories by Chana R. Schoenberger.