Science-based Firms Research Articles

Policies to support the internationalisation of latecomer science-based firms: the experience of large Brazilian pharmaceutical companies

PurposeThis study aims to analyse how different types of public policies have supported the internationalisation of latecomer science-based firms, taking the case of large Brazilian pharmaceutical companies (LBPCs).Design/methodology/approachThe methodology comprises a multiple case study and uses a literature review, fieldwork interviews and document analysis of eight LBPCs, five policymakers and three sector experts.FindingsDirect and indirect policies differ in supporting LBPCs’ internationalisation motivation. The indirect policies created the necessary conditions to accumulate knowledge and capacity in the domestic market. LBPCs that adhere more to policies supporting production and technological capabilities development are internationalising as an extension of their innovative efforts. In contrast, LBPCs that have built productive capacities and have not yet reached a minimum level of technological capacity go abroad to exploit their production capabilities with the support of direct policies.Originality/valueThis study contributes to international business and evolutionary literature, demonstrating the channels through which public policies support latecomer science-based firms. The results show that direct and indirect policies assist firms’ internationalisation in different ways, according to actors’ perception: providing support to strengthen their domestic capabilities, which have become competitive advantages in the international market; or offering support to external expansion. It emphasises that industrial policies are relevant to support companies in creating the initial conditions (ownership advantages) to internationalise, and direct policies are important to help companies to design international strategies. This study also debates that policies supporting companies’ internationalisation depend on their adhesion to programmes and incentives and their routines and capabilities, which are specific to each company and lead to different motivations for international expansion.

Sustaining the development of new science-based firms: The role of the entrepreneurial ecosystem

Cet article vise à comprendre le rôle de l’écosystème entrepreneurial (EE) dans le développement des nouvelles entreprises innovantes. Nous développons une étude de cas multiples dans la région de Lyon, en France, en analysant les différents rôles des acteurs de l’écosystème et leur importance dans les étapes principales du développement de l’entreprise. Pour ce faire, nous avons construit une étude longitudinale basé sur des entretiens qualitatifs avec 19 entreprises et organisations opérant dans le domaine des biotechnologies, de la pharmacie et des dispositifs médicaux, ainsi que sur des observations et des données secondaires. Nous avons analysé les données à l’aide de la “critical incident technique” de manière à saisir la nature des relations entre les entreprises et les autres éléments de l’EE. Nos résultats définissent les rôles des acteurs de l’écosystème, ainsi que les étapes dans laquelle ils jouent un rôle clé pour développement de l’entreprise. La discussion des résultats construit une approche théorique qui relie la littérature sur les EE avec le développement des entreprises scientifiques. Il souligne l’importance d’adopter une approche systématique lors de l’analyse des EE et fournit des considérations utiles pour les chercheurs, les entrepreneurs et les décideurs.

How R&D subsidies alter firm activities and behaviour

ABSTRACT Public research and development (R&D) subsidies are often used to increase firms’ R&D investments and innovation efforts and to spur firm-level additionalities, such as increased R&D inputs and innovation outcomes. However, relatively little is known about how such firm-level additionalities develop and interrelate over time. This study examines 15 cases of successful R&D projects to explore how additionalities from public subsidies are developed over time. We develop a process model outlining how different types of additionalities from public R&D subsidies develop and interrelate at the beginning of, during and after a project for science- and engineering-based firms. For science-based firms, public R&D subsidies appear to strengthen innovation and knowledge development after projects are completed and to increase firms’ strategic R&D orientation. For engineering-based firms, subsidies leverage internal credibility and collaboration, which leads to increased R&D activities, mainly during projects. Given these results, we provide guidance for policy and practice regarding how different types of firms benefit from subsidised R&D projects both during and after the project period.

Technological learning in large firms: mechanism and processes

ABSTRACT The prerequisite of developing countries’ economic growth is to move along the technological development trajectory through technological learning, and large firms as hubs of technological knowledge, play an important role in this transition. In this paper, we tried to bridge two main taxonomies in the field of technological development, one of them referring to taxonomies of firms, and the other one referring to technological learning processes. We have identified technological learning processes in several post catch-up large firms through content analysis and then by employing a survey approach, we explore technological learning processes of Iranian large firms. The results indicate that as per scale-intensive firms in Iran, learning by doing, learning by using, learning by interacting and learning from spillovers are respectively the most important technological learning processes. Regarding large science-based firms, learning by searching, learning by interacting and learning from spillovers are the key learning processes. Finally, these results have been compared with those of post catch-up large firms.

Interorganizational Knowledge Flows in Academia–Industry Collaboration: The Economic Impacts of Science-Based Firm Innovation

We investigate the double-edged impacts of interorganizational knowledge flows in academia–industry collaboration on the innovation economic impacts of science-based firms. When a firm receives knowledge directly from more research institutes, its innovation economic impact improves subsequently. In contrast, when a firm receives knowledge indirectly from other firms through a research institute, its innovation economic impact declines subsequently. We also explore the moderation effects of firm technological originality and generality. We report empirical findings from a panel data of science-based firms in the United States. Our analysis yields theoretical implications for academia–industry collaborations in the science-based entrepreneurship literature and practical implications for management practitioners and policymakers in science-based firm creation and development.

How Science-Based Start-Ups and their Innovation Ecosystems are Co-Produced: A Process Study

The concept of an innovation ecosystem has become increasingly popular in recent years, but theories accounting for it are still underdeveloped. Existing studies tend to focus on the components of the ecosystem at a specific point in time, leaving open the question of how the firm-environment interface is constructed and changes over time. Accordingly, this study is an attempt to explain the underlying processes of the firm-ecosystem interface, addressing the question: How does the development of the ecosystem impact the development of the start-up, and vice versa? In order to address this question, we turn to the evolutionary tradition, which has the advantage of being a systemic and process-based perspective. We employ a qualitative process-based methodology to investigate the trajectories of multiple science-based firms. Our theoretical contribution is a process model of how ecosystems emerge, potentially contributing to greater strategic adaptability at the firm level. Our empirical findings provide us the basis for theory extension, going beyond existing literature which posits a positive self-reinforcing process of resource accumulation as driving the development of an ecosystem over time. We propose a second process of dissipation, which forms because of the difficulties in transferring and accumulating experiential knowledge over time. We conclude by arguing that understanding the co-production of firms and their ecosystems have broader implications, particularly for theories of the growth of the firm.

Linking science-based firms with performance factors

Science-based firms (SBFs) are venture or corporation based on the development and commercialization of scientific discoveries that are exposed to the unique challenge to handle together business and science. Despite extensive efforts in the attempt to identify those factors that lead to the success of an SBFs the adoption of different definitions and names resulted in a lack of comprehensive picture on the determinants of SBFs' performances. With the objective to review the extant literature on SBFs’ performances and to understand what are the most appropriate parameters to evaluate an SBF, a systematic literature review adopting a comprehensive definition of SBFs was performed. The review, adopting an integrative approach, identified 30 papers published in top journals whose research questions deal with the determinants of SBFs' performances. Findings showed that determinants widely used such as net income within profitability measures, do not fully reflect SBFs performances and innovation abilities should be further investigated. Moreover, preconceived factors such as location and size have low or no impact on SBFs which opens the debate for more investigation. Also, the review identifies a comprehensive and multi-level set of determinants which allows delineating a number of research questions to be addressed in future research.

External knowledge flows and innovation capacity: the Italian service industries

ABSTRACTThis work explores the relationship between R&D activities, as well as cooperation agreements, and the innovation capacity of service firms. Accounting for interdependencies among variable, we verify whether external research is complementary or substitute for the internal research activities and whether the combination of external and internal sources of knowledge has a stronger impact on the innovation capacity of the science-based service industries. We also evaluate the gains from performing both internal and external R&D in science-based firms involved in cooperation agreements for innovation. Finally, to our knowledge, this work represents the first attempt to investigate the impact of several sources of knowledge and their combination on firms’ innovation intensity. According to our findings, the most important source of innovation is the internal one. Collaborations with public or private institutions seem to be more beneficial for firms involved in more intense innovation activities.

Stock Liquidity and the Value of Innovation: Evidence from U.S. Patent Data

How do liquid stocks affect the quantity and economic value of patents? Using a quasi-random experiment, we show that liquidity increases the economic value of innovation. These results are mainly driven by innovation-oriented firms, such as science-based firms, software-related firms, and specialized suppliers. We also show that liquid stocks increase the economic value of patents by disciplining and incentivizing managers to focus on economically valuable innovation through intensified institutional monitoring and facilitated information production. A positive effect of stock liquidity on innovation value, combined with a negative effect of stock liquidity on innovation quantity, suggests that liquid stocks encourage managers to trade off the quantity of patents against the economic value of patents when developing innovation strategies.

Perceived benefits of science park attributes among park tenants in the Netherlands

Science parks as area developments have existed for decades and captivated the attention of academia and policy-makers for their potential impact on firms and regions. Only limited attention is given to the needs of science park firms regarding what science parks offer. Therefore, this study focused on science park facilities and services and how firms perceive the benefits associated with these attributes. An online survey distributed among tenants on seven science parks in the Netherlands yielded 103 respondents. An a priori list of science park attributes was presented in order to gain insight in how the respondents associated these facilities and services with potential benefits. The benefits considered were derived from proximity and innovation literature within the science park context. In general, science park attributes were associated with either proximity benefits or benefits related to the SP real estate. Based on a cluster analysis of organisational characteristics three tenant types were identified. The three tenant types sought different benefits through different attributes. Commercially-orientated firms associated science park attributes as ways for being near customers. Mature science-based firms associated attributes with a wider range of benefits, such as image benefits, being near customers and other firms. Young technology-based firms were more cost-driven and focused on image benefits. The associations between various types of facilities and the benefits that tenant types seek, provide insights for practitioners in terms of the design and management of science parks and add to the body of knowledge of science parks within the context of innovation management.

Productive opportunities, uncertainty and science-based firm emergence

We draw on an in-depth longitudinal study of the emergence of a science-based firm to conceptualize firm emergence as the crystallization of one of the many productive opportunities identified and developed by the firm. Productive opportunities are bounded in time and there is a short “window of opportunity” to persuade potential partners of the value of the opportunity. If this fails, the venture will identify and develop an alternative productive opportunity (with a different technical/market rationale, and different requirements of resources, requiring new inter-organizational partnerships). We identify two types of uncertainty facing the emergence of science-based firms in terms of the alignment of different partners – technical and performance standard uncertainty. The firm uses three mechanisms to address uncertainty – envisioning, pooling, and staging - in order to align the resources from external partners and exploit the productive opportunities identified in a timely manner.

Near Misses in the Breakthrough Discovery Process

Why do researchers on the verge of breakthrough sometimes miss the discovery? While extensive literatures have modeled the course of successful discovery and pinpointed factors associated with groundbreaking discoveries, I focus on understanding why near misses occur by interviewing scientists who were very close to discovering the ribonucleic acid (RNA) interference breakthrough in biology but ultimately missed out. I identify three mechanisms rooted in paradigmatic rigidity that led to the seminal discovery being missed several times: not noticing or recognizing anomalies, actively resisting solutions, and failing to make the link between communities. These findings shed light on the process of breakthrough by clarifying that a better understanding of the mechanism behind near misses is crucial to mitigating them, saving time, and, consequently, boosting productivity and impact. They also have implications for boosting creative breakthrough performance in academic institutions and science-based firms, as well as for designing organizational research environments and guiding innovation strategy.

The positive externalities of IFRS R&D capitalization: enhanced voluntary disclosure

Studies comparing IFRS with U.S. GAAP generally focus on differences in the attributes and consequences of the recognized financial items. We, in contrast, focus on voluntary disclosure resulting from arguably the most significant difference between IFRS and GAAP: the capitalization of development costs—the “D” of R&D—required by IFRS but prohibited by GAAP. Using a sample of Israeli high-technology and science-based firms, some using IFRS and others U.S. GAAP, we document a significant externality of IFRS development cost capitalization in the form of extensive voluntary disclosure of forward−looking information on product pipeline development and its expected consequences. We show that this disclosure is value-relevant over and above the mandated financial information, including the capitalized R&D asset. We also show that the capitalized development costs (an asset) is highly significant in relation to stock prices, and enhances the relevance of the voluntary disclosures.

Why and How the Value of Science-Based Firms Violates Financial Theory: Implications for Policy and Governance

How and why the positive net effect of science related activities substantially increases the value that would be anticipated by the financial theory that seems to work so well for other fields is considered here. A qualitative analysis of 25 small listed biotechnology R&D firms illustrates that these firms do not follow the neo-classical expectation of Gaussian returns. To better understand this deviation from the expected Gaussian returns the firms are compared to S&P 100 and Thomson Reuters Global Innovator List. It is found that while these large firms have a higher than expected frequency of non-Gaussian events, the causes appear to be dominated by macro-economic or industrial events that impact large numbers of firms. With the small R&D intensive biotechnology firms, it is possible to identify specific events that appear to trigger the sudden increase or decrease in value. A better understanding of the nature and magnitude of these events allows for policy makers, investors and managers to better comprehend the unusually large risks and new opportunities associated with biotechnology R&D. From this, a greater insight is afforded into the dynamic value of R&D in general.

Types of proximity in knowledge access by science-based start-ups

Purpose – The purpose of this paper is to address the strategies adopted by science-based start-ups to gain access to knowledge resources at diverse spatial levels. It investigates the presence and relative importance of ties endowed with different types of proximity in firms’ knowledge networks, and the role played by non-geographical proximity in gaining access to knowledge sources, both nearby and distant. Design/methodology/approach – An analytical framework is proposed that distinguishes between two dimensions of proximity – geographical and relational – leading to different forms of proximity, which are further linked with modes of knowledge interaction (formal or informal). A methodology for network reconstruction is developed and applied to Portuguese molecular biology firms, permitting to identify the origin, location and nature of the ties and to position them along forms of proximity. Findings – The results show that the incidence and mix of the different forms of proximity vary in firms’ individual networks, being possible to identify several patterns. They also uncover the relevance of relational proximity, whether or not coexisting with geographical proximity and often compensating for its absence. Research limitations/implications – This approach needs to be complemented with further research that refines the operationalization of relational proximity, by attempting to disentangle the influence of different types of non-geographical proximity. Further research will also explore in greater detail the factors that may explain variety in the proximity mix of firms’ networks. Practical implications – The paper offers insights into the knowledge sourcing strategies adopted by science-based firms located outside the main concentrations of knowledge in their field. Originality/value – The paper contributes to the literature on the role of proximity in knowledge access, by developing and empirically testing a taxonomy of forms of proximity, considering the characteristics of science-based firms. It uncovers the mechanisms through which relational proximity can contribute to span spatial boundaries, highlighting the role played by entrepreneurs’ personal networks.

Growing fast or slow?: Understanding the variety of paths and the speed of early growth of entrepreneurial science-based firms

The paper explores the process of early growth of entrepreneurial science-based firms. Drawing on case studies of British and Dutch biopharmaceutical R&D firms, we conceptualize the speed of early growth of science-based firms as the time it takes for the assembly (or combined development) of three types of critical resources—a functionally-diverse management team, early fundraising and development of technology. The development of these resources is an unfolding and interrelated process, the causal direction of which is highly ambiguous. We show the variety of paths used by science-based firms to access and develop these critical resources. The picture that emerges is that the various combinations of what we call “assisted” and “unassisted” paths combine to influence the speed of firm growth. We show how a wide range of manifestations of technology development act as signaling devices to attract funding and management, affecting the speed of firm development. We also show how the variety of paths and the speed of development are influenced by the national institutional setting.

Science-based Firms Going Public: The Role of Patent Indicators and Top Management Teams

This paper examines how specific dimensions related to innovative capabilities influence the economic value of science-based firms when they go public. To test a set of hypotheses, we conduct an empirical research of a sample of dedicated biotechnology firms that completed an initial public offering (IPO) in the USA during 1983–2009. The results indicate that technological diversity, the patent stock’s value and dominant functional diversity in top management teams (TMTs) are positively associated with raising funds through an IPO. However, intrapersonal functional diversity in the TMT does not have a significant effect.

Growing fast or slow?: variety of paths and speed of early growth of science-based firms

The paper explores the process of early growth of entrepreneurial science-based firms. Drawing on case studies of British and Dutch biopharmaceutical R&D firms, we conceptualise and map the simultaneous and interrelated paths of early fundraising, managerial and technological development. We distinguish between “assisted” and “unassisted” paths to access critical resources, and ascertain how these paths combine to influence the speed of firm growth. We show how a wide range of manifestations of technology development act as signalling devices to attract funding and management, affecting the speed of firm development. We also show how the variety of paths and the speed of development are influenced by the national institutional setting.

How firms collaborate with public research organizations: The evolution of proximity dimensions in successful innovation projects

Although public research organizations (PROs) are potentially valuable collaboration partners for firms in the development of innovations, most firms find it difficult to develop and sustain fruitful collaborations with PROs. Proximity dimensions, such as geographical, cognitive, organizational, and social proximity, are important facilitators of inter-organizational collaboration. Nevertheless, our understanding of the interaction between and evolution of different proximity dimensions over time is limited. Based on a longitudinal study of 15 successful innovation projects involving firms and PROs as collaboration partners, we find that different proximity dimensions are important for the establishment of new collaborations, depending on a firm's characteristics. While engineering-based firms tend to rely on geographical and social proximity to PROs, science-based firms rely more heavily on cognitive and organizational proximity. Moreover, we observe that firms with initial social and geographical proximity to PROs can sustain and expand their collaborations by developing cognitive and organizational proximity over time.

When do Acquirers Invest in the R&D Assets of Acquired Science-based Firms in Cross-border Acquisitions? The Role of Technology and Capabilities Similarity and Complementarity

Drawing on a multiple case study of acquisitions of UK biopharmaceutical firms, we develop an analytical framework that elucidates how key determinants of the knowledge base of science-based firms and their combinations through M&As interact and affect post-acquisition investment in the target’s R&D projects. We show that two factors — the complementarity/similarity of the technology, and the complementarity/similarity of the discovery and development capabilities of the target and acquiring firm — interact to produce different outcomes in terms of investment in the acquired firm’s R&D assets and for the local science and technology system.