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Hong Song and Wensong Bai

The pharmaceutical industry, especially the biopharmaceutical segment, is a high-tech sector characterized by high investments and high prices. But it is also a sector with high risk. Traditionally, only advanced industrialized economies have been able to support such an industry. Recently, however, the internationalization of R & D activities for new drug development, combined with favourable local factor conditions in emerging economies, has worked to change this situation. Small and specialized biopharmaceutical firms from emerging markets have begun to compete successfully along the global value chain. This study examines three of the leading Chinese firms in this sector to illustrate the primary factors that have driven their growth. The study shows that the global shift of R & D activities to developing countries has provided market demand to stimulate the growth of indigenous firms. At the same time, the local, sectoral innovation system in China, including universities, state research institutions and the regulatory environment, has provided financial and human resources, as well as infrastructure to support this growth. Yet the histories of these firms also underline the critical role played by the entrepreneurial founders of these firms in pursuing innovation through capability building and development. How these companies may continue to develop within the Chinese context and become more global players as the industry grows and matures is an interesting question for research.