Merck Plans Radical Overhaul of Drug R&D Unit
PETER LOFTUS And  JONATHAN D. ROCKOFF
Updated Dec. 27, 2013 4:50 p.m. ET

http://online.wsj.com/news/articles/SB10001424052702304753504579284651836908502?mod=djemalertNEWS

This is an example of how companies who drove innovation primarily from internal sources are deploying whole new concepts of innovation outside their companies. Merck is joining such companies as IBM and Proctor and Gamble. From these examples, it is clear this approach is viable for any industry. Also, I believe it is a way for smaller companies to leverage the internal sources to better compete with the big guys in their industries.

Merck MRK +0.02% & Co. is working on a plan to radically reshape its once-storied research-and-development unit that would create international innovation hubs tapping into drug research outside of its labs. 

Merck would create these hubs in or near Boston, the San Francisco Bay area, London and Shanghai, according to people familiar with the matter—regions with a critical mass of academic and commercial R&D. The company would use the bases to scout for promising biotechnology and pharmaceutical research that Merck could license or acquire in deals, according to these people…. 

….A Merck spokesman confirmed the company plans to establish a "scientific presence" in the four regions, to identify both early- and late-stage opportunities. "This is consistent with our strategy of actively seeking external scientific innovation to bolster our pipeline with candidates that provide unambiguous promotable advantage," the spokesman said. He declined to comment on potential divestiture plans. 

Together, the moves would represent a significant shift for Merck, making it more receptive to external opportunities and less wedded to in-house handling of the entire life cycle of a drug's development, from discovery through clinical trials….. 

….Merck's labs were once the envy of industry, discovering products like the first measles vaccine and the first marketed statin drug to lower cholesterol. Merck researchers prided themselves on carrying drugs from discovery to the last stages of development in-house. But they haven't scored a major success since diabetes drug Januvia and cervical-cancer vaccine Gardasil were approved in 2006.(very typical of companies with a history of internal innovation).