On the governance of incentives to innovate: Can Open Source models be applied to drug development?

In this conceptual chapter, we explore and discuss the potential of a private-collective approach to the governance of incentives to innovate in the pharmaceutical industry. We specifically consider the governance models elaborated for the development of Open Source Software (OSS). Its diffusion in the software industry led the literature to acknowledge the existence of a hybrid model of governing incentives to innovate : the private-collective model1. Lay press and medical journals report an increasing number of “Open Source Pharma” experiences but only little systematic enquiry exists on this issue. We contribute to this debate by discussing this issue from an economic and managerial perspective, focusing mainly on the incentives to innovate in different contexts and governance structures.Specifically, we discuss whether and how it is feasible to replicate the OSS model for collaboration among private, not-for-profit and public organizations in pharmaceutical research starting from the analysis of the broad incentive structures, their analogies and their differences in the pharmaceutical industry vis à vis the software industry. Even though important analogies exist, we want to suggest that drug development cannot use the exact same governance models as is used in the code writing business because each coordination or innovation process has specific antecedents. Specific details of attributes of the underlying economic and technological environment in each industry specifically shape incentives to agents and actors, both at the innovation and market stage. Our economic analysis can contribute to developing a framework to shape the legal analysis of private-collective governance in medical research and development and help to craft specific legal and contractual arrangements for the governance of incentives to innovate.