Firm Heterogeneity in Biotech: Absorptive Capacity, Strategies and Local-Regional Connections

Abstract

This paper focuses on the characteristics of biotech firms with various levels of research and development (R&D) activity. It is done by exploring the relationship between R&D intensity, alliances and the extent of regionalization of firms' activities using evidence from a survey of US-based biotechnology firms. We profile two firm prototypes: research-oriented firms and product-oriented firms, focusing on their characteristics, strategies and operations. These include activities devoted to exploration and exploitation through alliances with universities (more exploration) and with pharmaceutical companies (exploration and exploitation), and locational needs which facilitate both exploration and exploitation.

Notes

1. Based on Liebeskind et al. (1995, pp. 6–7), a social network is defined as a collectivity of individuals among whom exchanges take place that are supported only by shared norms of trustworthy behaviour (reciprocity, respect for intellectual property rights, honesty in research). Unlike hierarchies, but like markets, social networks involve exchanges between legally distinct entities. Unlike markets, but like hierarchies (governance of exchange within a firm), social networks support exchange without using competitive pricing or legal contracting. Shared norms of exchange in trust-based relationships ensure a fair outcome.

2. Five categories of employment: ≤10, 11–50, 51–100, 101–500, >500; firms with less than 500 employment are defined as SMEs.

3. Further discussion of revenue is presented below in the section on strategy.

4. Any comparison of dollar values is not possible; disclosure/proprietary issues prevented firms from giving out R&D dollar figures.

5. Five-point Likert scale: 1 = not important, 2 = somewhat important, 3 = important, 4 = very important and 5 = critically important.