Biopharmaceutical innovation and industrial developments in South Korea, Singapore and Taiwan

South Korea, Singapore and Taiwan are well known as export-oriented developmental states which for decades employed industrial policy to target particular industries for government support. In the past fifteen years, these three countries all identified the biopharmaceutical industry as a strategic sector. This article explores, through economic analysis, the rationale for this decision and the strategies chosen for linking into the global bio-economy with the objective of catching up in biopharmaceuticals. The paper identifies three comparative advantages enjoyed by these countries in the biopharma sector: (1) public investments in basic research; (2) private investments in phase 1 clinical trials; and (3) a potentially significant contract research industry managing latter-stage clinical trials. Governments employ a range of industrial policies, consistent with these comparative advantages, to promote the biopharmaceutical industry, including public investment in biomedical hubs, research funding and research and development (R&D) tax credits. We argue that the most important feature of the biopharmaceutical industry in these countries is the dominant role of the public sector. That these countries have made progress in innovative capabilities is illustrated by input measures such as R&D expenditure as share of gross domestic product, number of patents granted and clinical trials, and volume of foreign direct investment. In contrast, output indicators such as approval of new chemical entities suggest that the process of catching up has only just commenced. Pharmaceutical innovation is at the stage of mainly generating inputs to integrated processes controlled by the globally incumbent firms.