Discontinuous learning as a response to disruptive regulatory change: The case of Indian pharmaceutical industry

Technological or institutional change has proven to be big cause for failure of established firms and history is full of such examples. The stregnhthening of patent laws as a result of TRIPs (Trade Related intellectual property rights) agreement represents such a institutional change for knowledge based industries from developing countries. This represents a radical break with the past in which developing countries typically had only weak levels of patent protection. In this context this research examined the learning processes involved in development of innovative capabilities in the Indian pharmaceutical firms as a response to strengthening of patent law. This research shows that Indian pharmaceutical firms are responding to disruptive regularity change by developing competencies incrementally as well as radically. Indian firms are hiring the Indian scientists working overseas in multinational pharmaceutical R&D and collaborating with Indian and overseas research institutes and universities to build radical capabilities. This explorative and exploitative learning in Indian pharmaceutical firms have wider implications for firms from other developing countries facing TRIPS challenge.