Biotechnology Clusters in the U.K.: Lessons from Localisation in the Commercialisation of Science

Today, U.S. biotechnology firms dominate the growing therapeutics and diagnostics sectors despite most of the key discoveries being made by European, and especially U.K. scientists. Lessons have been learned about the economic importance of commercialisation of bioscience. Within Europe, the U.K. is the leading challenger of U.S. hegemony in biotechnology exploitation. Knowledge-driven clusters of start-ups and established smaller and medium-sized businesses have developed in Cambridge and Oxford along with nascent agglomerations in Surrey and Scotland. They are responsible for the turnaround. As in the U.S., intimate links with large pharmaceutical firms and publicly-funded research centres are key to spin-out businesses, suggesting a generic "new economy" model. The specific problem at present is scale and the need to make up ten years lost ground. But the evidence is there that the U.K. is taking up the competitive challenge.     

Risk management of strategic alliances and acquisitions between western MNCs and companies in central Europe

This article intends to evaluate risks associated with strategic alliances and acquisitions between Western MNCs and central European companies and to suggest appropriate means of control to deal with two different types of risks: relational and performance. While postsocialistic governments in central Europe have increasingly welcomed foreign direct investments, a relatively high degree of uncertainty still exists for companies contemplating entry into this region due to a lack of cultural knowledge and insufficient business experiences. Based on in‐depth interviews with U.S. and European MNCs, hypotheses are developed in explaining relationship between risks, control, and trust in forming strategic alliances and exercising acquisitions, along with managerial implications. © 2005 Wiley Periodicals, Inc.     

The effects of business–university alliances on innovative output and financial performance: a study of publicly traded biotechnology companies

Companies in the biotechnology industry face major challenges in developing and commercializing new products. Focusing on publicly traded biotechnology firms that are not members of university incubators or research parks, this paper argues that the links these companies develop with universities can have beneficial effects on a company's operations. Analysis of 2457 alliances undertaken by 147 biotechnology firms shows that companies with university linkages have lower research and development (R&D) expenses while having higher levels of innovative output. However, the results do not support the proposition that companies with university linkages achieve higher financial performance than similar firms without such linkages.     

Social capital of venture capitalists and start-up funding

How does the social capital of venture capitalists (VCs) affect the funding of start-ups? By building on the rich social capital literature, we hypothesize a positive effect of VCs?? social capital, derived from past syndication, on the amount of money that start-ups receive. Specifically, we argue that both structural and relational aspects of VCs?? social networks provide VCs with superior access to information about current investment objects and opportunities to leverage them in the future, increasing their willingness to invest in these firms. Our empirical results, derived from a novel dataset containing more than 1,500 first funding rounds in the Internet and IT sector, strongly confirm our hypotheses. We discuss the implications of our findings for theories of venture capital and entrepreneurship, showing that the role and effect of VCs?? social capital on start-up firms may be more complex than previously argued in the literature.     

Strategic alliances by venture capital backed firms: an empirical examination

A growing body of literature examines the formation of strategic alliances as an important value-added role provided by venture capital firms. This paper contributes to this literature by examining two related questions: whether venture capital firms use strategic alliances as a substitute or compliment to capital infusion, and how venture capital firms use alliances to mitigate different types of risk. Results from 2505 venture-backed startups reveal that venture capital firms treat alliance formation as a substitute for capital infusion and that the breadth of the network of syndication partners investing in the startup increases the number of its strategic alliances. We also find intentionality in alliance formation. Specifically, firms operating in industry environments characterized by technical risk are more likely to form alliances with partners capable of mitigating technical risks, and firms operating in environments characterized by market risk are more likely to form alliances with partners capable of mitigating market risk. Our findings lend additional support to the perspective that alliances represent an important mechanism through which venture capital firms add value to their portfolio companies.     

New Biotechnology Firms in Germany: Heidelberg and the BioRegion Rhine-Neckar Triangle

In Germany, in the second half of the nineties, a dynamic development of commercial biotechnology took place, undertaken by a considerable number of new firms. The following article deals with the foundation of biotechnological firms in the BioRegion Rhine-Neckar Triangle (with the center in Heidelberg). For a long time, the development of biotechnology in Germany and in the Rhine-Neckar Triangle was hindered by institutional barriers. The main reasons were the narrowing of company strategies of big chemical and pharmaceutical firms, the low impulses to found biotechnology companies out of academic research, the institutional surroundings not aligned to the needs of biotechnology (e.g. no venture capital market) and finally government restraints concerning the specific and particularly regional concentrated support of biotechnology. These particularities are also reflected by the structure of the population of young companies in the Rhine-Neckar Triangle. The main emphasis of biotechnology firms is placed on technological services (research on demand) and platform technologies, different sub-areas of therapeutics research (pharmaceutical basic materials, finding active substances), on the production for the diagnostics industry and on bioinformatics. These companies do not co-operate much, national and international relations predominate. Only a few scientists of regional research institutions want to found a biotechnology firm, although the region seems to attract a certain number of company founders from other regions.     

The Dynamics of Industrial Clustering in Biotechnology

This paper is a study of the process by which industrial clusters form. It identifies the forces of attraction to new companies to a cluster in biotechnology in the U.S. as it grows. It uses a model of entry of new firms into the industry to measure the degree of attraction to those new firms of the presence of an existing cluster at a particular location. The paper finds that the main agent of attraction to new firms to enter the biotechnology industry is the presence of a strong science base at that location. This provides a greater magnet than the strength of any particular sector of the industry. In terms of attraction between different sectors within the industry, the paper finds that there is positive attraction and feedback between a group of sectors in the biotechnology industry – namely the therapeutics, diagnostics and the equipment/research tools sector. However in other sectors of the industry – chemicals, food and to some extent agriculture – there is much less attraction and interaction between them. This implies that clusters of firms tend to develop only in particular sectors of the industry and positive feedback mechanisms do not extend to other parts of the industry.     

Start-ups as drivers of market mobility: an analysis at the region–sector level for The Netherlands

Although recent literature suggests that competition among incumbent firms is caused by the entry of new firms, this relationship has not yet been tested directly. In this study a regression model is established in which a direct measure of competition among incumbent firms, the market mobility rate, is explained by start-up rates and control variables. The results show that the effect of start-ups on market mobility varies by sector. There is a strong positive relationship for industry sectors but an insignificant relationship for service sectors. These results suggest differences in the types of entry between sectors and in the roles start-ups play in different sectors.     

Business Incubation Centers and New Firm Growth in the Basque Country

The purpose of this article is an attempt to identify those factors related to human capital and organizational resources which help in overcoming barriers to survive during the infancy period of firm start-ups. The paper aims to find out the extent to which the support received by entrepreneurs from incubator centers is critical to ensure firm life. Primary data have been used to conduct an empirical analysis on a sample of 114 start-up firms participating in a business assistance program (i.e., business incubation centers). Results from regression analyses suggest that human capital attributes of entrepreneurs and certain start-up firm characteristics seem to be critical to explain business success. An important implication of this study is that, despite the economic advantages derived from this policy based on the promotion of business incubation centers policy makers should be cautious in its application. Empirical evidence from our study suggests that a portion of new firms being nurtured in business incubation centers may cause the exit of more efficient incumbent firms not receiving such policy support.     

Chinese venture investments in the United States, 2010–2017

This article contributes to the understanding of Chinese venture investors in the United States by comprehensively measuring the amount and type of venture investments coming to the United States from China. Venture activity is examined by focusing on the number of investments made by venture capital funds, both U.S.‐ and China‐based that include Chinese corporations undertaking corporate venture capital (CVC). Chinese participation in venture funding of United States emerging companies increased from 21 investments in 2010 to 407 in 2016 and 2017. Venture capital funds account for 78% of the investment activity, with Chinese CVC undertaking 22% of the investments. We contribute to the literature of CVC by providing definitions of three specific types of investing firms: corporate funds, strategic investors, and strategic partnerships. In addition, we provide data and examine the motivations of Chinese firms forming strategic partnerships with United States startups.     

Job machine,think tank,or both: what makes corporate spin-offs different?

One way through which knowledge and technology transfer can take place is through the foundation of new firms by former employees of incumbent private firms. In this paper, we examine whether knowledge transferred from the incumbent causally affect employment growth and post-entry innovation activities of the new firm. We focus on start-ups for which a new idea (a new product, technology, production process, or management concept), which the founder developed during her work as an employee, was essential for setting up the new business. These firms are denoted corporate spin-offs. Using data from German start-ups founded in the period from 2005 to 2008, we apply nearest-neighbour propensity score matching. We find that corporate spin-offs outperform other start-ups founded by former employees of incumbent private firms that are not based on an essential idea in terms of post-entry innovation activities. However, we cannot show that corporate spin-offs benefit from the transferred idea in terms of employment growth. We conclude that a transferred idea is primarily an input factor and a stimulus for subsequent post-entry innovation activities of corporate spin-offs.     

Corporate venture capital (CVC) investments and technological performance: Geographic diversity and the interplay with technology alliances

Firms are increasingly operating portfolios of geographically dispersed CVC investments for accessing a variety of location-specific knowledge, often alongside traditional external knowledge-sourcing strategies such as technology alliances. We examine the conditions under which geographic diversity in corporate venture capital (CVC) investments has positive consequences for firms' technological performance in the context of simultaneously pursued technology alliance strategies. We find that geographic diversity in CVC portfolios enhances performance as long as firms avoid knowledge redundancy in knowledge-sourcing arising from geographic overlaps with technology alliances, and the managerial complexity, coordination costs, and resource constraints stemming from the simultaneous pursuit of diversity in both technology alliances and CVC investments. Our inferences draw on a panel data set on the patents, CVC investments, and technology alliances of 55 CVC-active firms in a variety of industries.     

Two Worlds of Venture Capital: What Happened to U.S. and Dutch Early Stage Investment?

European attempts at imitation of U.S. venture capital have been less successful in stimulating high tech start-ups. Our analysis of the differences between Dutch and U.S. developments points at institutional and organizational differences as explanatory factors. Disappointing longer term performances of Dutch IPOs have caused the closure of the Dutch Parallelmarket. Indeterminate length of life of Dutch vc funds contributed to a loss of trust in early stage IPOs. The U.S. – in contrast – benefitted from contractually fixed length of life of venture capital funds. The U.S. share of early stage investment displayed a wave-like pattern, which is positively related to the number of IPOs and of vc firms. Interconnectedness and follow-on funds depress early stage investment.     

Financing technology-based small firms in Europe: what do we know?

This paper reviews the evidence on financing technology-based small firms (TBSFs) in Europe. European TBSFs finance new investments by relying primarily on internal funds, due to capital market failures induced by asymmetric information. European venture capital has caught up with US venture capital, but this is mainly because of the growth in UK venture investments. It is unclear whether European venture capital has been able to certify the quality and enhance the growth of funded companies. Compared with the NASDAQ, there is little development of trading in high-tech stocks in Europe: the so-called New Markets established in the 1990s collapsed in the wake of the Internet bubble crash. Public venture capital and research and development (R&D) tax incentives seem to have positively affected high-tech firms.     

Completing the technology transfer process: M&As of science-based IPOs

This paper investigates the valuation and merger and acquisition (M&A) dynamics of the population of 254 biotech firms that went public in Europe between 1990 and 2009. Among these, we identify a high proportion (40%) of firms affiliated with a university or another public research organization. After controlling for intellectual capital and other possible determinants, we find that affiliation with a university is recognized as beneficial by investors. This affiliation enhances the valuation of the firms and the probability of being targeted in subsequent M&As, particularly in cross-border deals. We conclude that following the initial public offering acquisitions by incumbent firms are mechanisms to finalize the technology transfer process started in a research institute. Our findings allow us to derive implications for venture investors, academic entrepreneurs, university managers, and policymakers.     

A comparison of Japanese and U.S. firms completing initial public offerings

We set out to examine firms breaking into the top tier of for-profit companies in the U.S. and Japan to find differences across the two groups. To accomplish this, we conducted a questionnaire survey of companies that had recently undergone an initial public offering (IPO) in each country and compared them on characteristics frequently associated with new firms.As we expected, even when the different sizes of the two economies were taken into account, there were considerably fewer listings in Japan than in the U.S. One reason for this is that the listing requirements for young Japanese firms, although not stricter, are much more strictly enforced. Hence, fewer Japanese firms are able to list.Our results show that the Japanese firms were markedly different from their U.S. counterparts on several characteristics. They tended to be older and larger, which is consistent with more stringent listing requirements in Japan. They were also much more often led by their original founders. This is a surprising result given that the Japanese firms, being older, had longer to lose their founders. When a successor to the founder was president, it was much more often a relative of the founder than in the U.S. The Japanese founders rated themselves higher on relatively emotional characteristics, such as aggressiveness, paternalism, and charisma than did either the U.S. presidents or the Japanese nonfounder presidents.The Japanese firms relied solely on the president for decision-making prior to the IPO more often than the U.S. firms did. However, the Japanese firms also moved in greater numbers to group decision-making around the time of the IPO.The post-IPO investment strategies of the Japanese firms were characterized by a focus on new product development, an increase in R&D spending, and investment in the company's capital plant. In contrast, the U.S. firms reported more interest in exploiting their existing market and buying other companies, usually leaving R&D spending at its pre-IPO level.Overall, it is surprising that on many characteristics, the Japanese IPOs tended to fall more to the extreme associated with new companies than did the U.S. firms. They were dominated by founder influence, the founders were apparently highly emotional, their management style was initially autocratic, and their strategies targeted innovation and internal development as avenues to growth. This pattern is consistent with a prior hypothesis that the lack of structural support for new firms in Japan results in only the most extreme personalities pursuing and succeeding in company formation.For researchers, a significant implication of this research is that Japanese ventures may not behave according to the same rules as U.S. ventures. Research samples that fail to distinguish nationality may obscure cross-regional variations.For practitioners, the major lesson is that a Japanese venture is likely to be much different from one in the U.S. Dealing with one is probably even more unlike dealing with an established company than working with a U.S. start-up might be.     

Does easy start-up formation hamper incumbents’ R&D investment?

This paper investigates the implications that complementary assets needed for the formation of start-ups have on the innovative efforts of incumbent firms. In particular, we highlight a strategic incentive effect by which the innovative efforts of incumbents are decreasing in the availability of the complementary assets needed for the creation of a start-up. Furthermore, we argue that the R&D investments of incumbents are positively related to the presence of policy support to innovation, and to the firm’s endowment of human capital. The empirical relevance of our theoretical hypotheses is investigated—and supported—by using firm level data.     

Is History Repeating Itself?

Though American pharmaceutical companies continue to dominate global markets, Japanese drug firms are catching up. And with the advent of biotechnology as a commercially viable means of producing drugs, Japanese firms may, in fact, be able to leapfrog their American competitors. To determine whether this is likely to be the case, the following article focuses on Japanese biotechnology policy, which has been taking shape for roughly a decade. Comparison to the laissez-faire American approach to the development of this technology reveals that history may indeed be repeating itself. If the U.S. government does not soon articulate a comprehensive industrial policy, America's mighty pharmaceutical firms may share the unfortunate fate of their predecessors in the automotive and computer industries.     

Biotechnology Firms in Sweden

The purpose of this study is to create an understanding of the strategies that biotechnology firms in Sweden implement, how they manage to keep their competence ahead and how they finance their research. Their main factor of success is the ability to rapidly identify the latest research findings from academia and turn them into commerciable technology. The collaboration with academia is thus an important part of the networking strategy of the biotechnology firms in Sweden. Outsourcing parts of their activities keeps the firms flexible, which is necessary in this high risk business.Whether a firm chooses an intermediary or integrating position is not found to be correlated to age or size. It is instead heavily influenced by the strategies of large pharmaceutical companies, the nature of the firms' core technology, expectations of investors and the overall access of capital. The private capital market in Sweden has undergone a change during the last years. New marketplaces for young, innovative firms have been created in Sweden and their existence is most likely one reason for the increasing presence of venture capitalists in the country. That, in turn, increases the opportunities for new firms within biotechnology to develop in Sweden.