Capturing the changes in the knowledge base underlying drug discovery and development in the 20th century and the adjustment of Bayer, Hoechst, Schering AG and E. Merck to the advent of modern biotechnology

The so-called biotechnology revolution has changed the institutional and knowledge environment of the pharmaceutical industry. The industry incumbents have faced the challenge of adjusting to the new conditions for innovation in drug discovery and development. Drawing on the theoretical framework of the organizational capabilities of the firm, this contribution aims at capturing the changes in the knowledge environment and exploring the adjustment of 4 German corporations (2 companies rooted in the coal tar dyestuff industry and 2 traditional pharmaceutical companies) to the advent of modern biotechnology. Despite the firm-specific capabilities in organic chemical synthesis, the representatives of the coal tar dyestuff industry seem to have been better able to adjust to the external discontinuity in their knowledge environment.The existence of research and development activities, the science-based research tradition together with interactions to access the extramural knowledge base of the firms seem to have been crucial in the perception and adoption of the new technological possibilities of biotechnology after the 1970s, rather than prior competence in biotechnology or the employees with the skills to develop the capabilities to exploit it