Competitive interdependence in pharmaceutical innovation: The co-evolution of global value chains and U.S.–China national innovation systems

Abstract This paper examines why intensifying U.S.–China geopolitical competition in pharmaceutical innovation has not led to full decoupling, proposing the concept of competitive interdependence as an analytical lens. Drawing on a co-evolutionary framework of global value chains (GVC) and national innovation systems (NIS), it argues that pharmaceutical innovation is simultaneously embedded in transnational production networks and domestic institutional systems. This dual embeddedness generates structurally asymmetric interdependence across both material and institutional dimensions. Empirically, the U.S. depends on China for scale and cost-efficient inputs, whereas China relies on the U.S. for core technologies, advanced instruments and talent. Institutional alignment, particularly China’s convergence with internationally recognized standards largely shaped by the U.S., along with shared innovation elements, embeds the two innovation systems into each other. However, these connections create asymmetric dependencies and strategic vulnerabilities that intensify competition under geopolitical pressure. Although both sides have pursued value chain restructuring and policy adjustments to reduce risks, the prohibitive costs of full separation prevent complete decoupling. This study contributes to the literature by offering a framework to understand the structural limits of decoupling in high-innovation sectors, thereby theorizing GVC–NIS interactions under geopolitical tension.