Shaken, Not Stirred: The Re‐combinatorial Capacity of High‐Tech Regions

Abstract

This paper examines the re‐combinatorial capacity (RCC) of regional high‐tech economies. Empirically the paper studies the emergence and development of new firms derived in various forms from a downsizing lead pharmaceutical firm (Pharmacia). A model is developed conceptualizing RCC of regions by the levels of business creation obtained at different levels of asset complexity for given levels of decomposition of available resources. RCC of Pharmacia's home region (Stockholm–Uppsala) is characterized by mapping all 75 new firms derived from Pharmacia onto the RCC space, revealing low RCC particularly for resources released from Pharmacia in highly decomposed form. Recombinations whereby managers from Pharmacia and other related incumbents become founders of new bio drug discovery firms (DDFs) come out as particularly scarce when benchmarked against the simultaneous emergence of a DDF sector in the otherwise comparable Copenhagen region. Venture capital is argued to be a key mechanism in RCC affecting high‐tech entrepreneurship. We test and confirm that compared to their Copenhagen counterpart, DDFs in the Stockholm–Uppsala region received much less early stage venture financing which therefore provided notable disincentives for re‐combinatorial manager‐to‐founder transitions.

Keywords:

• Entrepreneurship
• venture capital
• regional innovation system
• bio‐pharmaceuticals

Acknowledgements

The authors are grateful to Toke Reichstein for contributions to models presented in Section 4.2 and to Rasmus Lund Jensen for preparing parts of its data. Valuable suggestions were offered by Olof Ejermo and by three anonymous referees.

Notes

1. The horizontal axis could be extended to include re‐combinatorial potential at even further levels of decomposition, such as staff mobility across company borders, or spillovers, as addressed in the literature on proximity and clusters (Jaffe, 1993; Gilbert et al., 2008). These forms are de‐emphasized here merely because their recombination tends to take place through existing firms, whereas in the present context we are specifically interested in recombinations leading to new firms.

2. It should also be noted that our data and method would not pick up if former Pharmacia employees were recruited to managerial positions in new bio‐ventures. Unfortunately no study has tried to identify such transitions, but in the form of anecdotal evidence they have been pointed out to the authors by well‐informed observers of the S‐U region.

3. For a more detailed account of our delimitation of DDFs within the broader bio‐sector see Valentin et al. (2008). The reader should note that for these reasons our comparison is not all‐inclusive for the bio‐sector. Firms specialized in diagnostics, for example, are not included.