Abstract
Past studies examining survival factors of biotechnology firms have focused on pioneer countries, such as the USA, the UK and Germany. However, as the biotechnology industry in Asia is reaching the take-off stage and showing a high growth rate, the research on survival factors in the context of Asian latecomers is needed. The present research investigates internal and external factors affecting the survival of SMEs (Small and Medium-sized Enterprises) in the biotechnology industry in South Korea. The Cox hazard model was employed to perform a robust estimation in survival analysis. The analysis of internal factors showed that the origin of a firm (i.e., having prior experience or spin-offs) and the business sub-sector (i.e., platform-based) affect the hazard rates of biotechnology firms. In terms of external factors, unlike strategic alliances, government R&D funding lowered hazard rates for the firm’s survival. Additionally, considering that the reasons of firm exit can be divided into bankruptcy and M&A (Mergers and Acquisitions), the different effects of origins from other firms and strategic alliance for firm survival are confirmed. The results suggest that prior experience, platform-based and constant government R&D funding contribute to the sustainable development of SMEs in the biotechnology industry.
Highlights
The development of new drugs to meet rapidly growing medical demand faces many challenges
This study aims to find the factors for survival in the biotechnology industry and uses (1) origins from other firm; (2) platform-based firm; (3) government R&D funding and (4) strategic alliances as independent variables and the firm size, age, R&D intensity, business diversification and industrial growth potential as control variables, which have been largely utilized in previous studies
The present research contributes to identifying entry, exit and survival situations and to finding internal and external factors for survival of SMEs in the biotechnology industry, in South Korea
Summary
The development of new drugs to meet rapidly growing medical demand faces many challenges. Despite the continuous increase of R&D investment in the pharmaceutical industry, the number of new drugs being approved is stagnant, showing a decrease in R&D productivity caused by challenges faced in the development process of new drugs. The annual growth rate, which was 9% in 2003, slowed to a record low of 3.5% in 2012 [1]. Considering these challenges, the pharmaceutical industry has shifted its focus from synthetic chemical drugs to bio-drugs [2]. The proportion of bio-drug sales among the global top 100 drugs is expected to increase sharply from 34% in 2011 to 49% in 2018 [3]
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