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Interview and transcription March 19, 2009
Tom Allen on the Allen Curve: Creating the Right Space to Foster a Spirit of
Thomas J. Allen, Ph.D., Howard W. Johnson Professor of Management, Emeritus
MIT Sloan School of Management
[00:09:58] I’m Tom Allen and I’m talking about a study that we did in biotechnology,
clusters of biology technology companies in the Boston Cambridge area, testing the
basic hypothesis that whether clustering of startup high technology companies
together geographically has any benefits or not. It’s been a discussion in the past. We
defined an experimental group first of companies that were located in the region
behind MIT or Harvard Medical School on the Boston side of the Charles River. We
defined it by postal codes. We said if they happened to be in one or more zip codes
then they were in our experimental group. If not, they were in our control group, which
included companies within one hundred kilometers of where the experimental group is
located. One went as far as Wooster, Massachusetts. And we made comparisons
between the two of them; now, what we had – and you’ve got some of the data we
set up a web page that listed all of the companies that were doing biotechnology
research in the region and we pulled a sample of fifty companies that we were going to
gather data from and what we did was set up the web page first for the two hundred or
so companies. Then, on randomly chosen days we send emails out to scientists in the
fifty companies that we’re studying and we asked them to think about what they did on
that given day. Had they talked to anybody in any of these other companies about a
scientific subject, not business deals, but scientific subjects? Then just take the mouse
and click that company, it goes into our data base, we collect that because we do this
repeatedly over a period of six months, every week on a different day for six months.
Then we plot out a network from the data that we have, we know which companies
have had some contact with one another and that includes by the way, five major
broad based pharmaceutical companies located in the area. Merck, Pfizer, Wyeth,
Astrozac, and Louverdis are located here and we sampled scientists in those
companies as well. There were also a number of large wellestablished biotechnology
companies: Biogen, Genzyme, and so forth, five or six companies of that sort and we
sampled from them as well. So, we had a pretty complete network of companies
because even those we weren’t studying directly, we got references to, somebody said
to talk to, somebody in the company that didn’t happen to be one of the ones we were
Copyright 20052015 IOpen. Creative Commons 3.0 AttributionNoncommercialNo
Derivative Works. Institute for Open Economic Networks (IOpen), 2563 Kingston
Road, Cleveland, OH 44118 USA Website: http://www.iopen.org
one of the basic questions was. of course. of within the geographically defined cluster area than the companies that were farther out. these people were talking with one another facetoface. it’s just about zero. Boston University is very active. OH 44118 USA Website: http://www. “Yes. Creative Commons 3. I think. what’s their mean distance from all the other companies that are in the study? We related that to the level of communication among that same set. the scientists in that company. We also found the communication was much higher. an area which is a neighborhood of Cambridge where most of them are located. So now that’s a character of the company. As a result. and so forth. People get out and bump into one another much more frequently and it is a very interesting phenomenon by the way. There were actually five Universities nearby doing biotechnology research.sampling we assumed that that meant there was communication between those two companies. “How are the communications within the cluster. it could be done but I wouldn’t get into that level of detail. people go outside the company for lunch and they go to the lunchrooms and cafes and so forth around Kendall Square. they become a major factor in the network and I think that it really helps the network to develop as a result of their position. We also found that people of course move between companies when they Copyright 20052015 IOpen. the company that we’re looking at. But we then were able to compute for each company the average distance that company was from all the other companies in our study. and they were working hard at it. within those zip codes than there is with those companies outside?” And the answer is. That is how distance impacts the likelihood of communication between companies. Northeastern University less active. Once you have data like that you can begin to ask a lot of questions about it. But. it’s very high in close and drops off very rapidly with distance showing that broadband communication isn’t really a substitute for faceto face. but these companies were pretty small and the error there isn’t very great. Tufts a little bit through the Medical School and so forth; but one of the key things that came out was the role of those major pharmaceutical companies. how much did that company. a lot of knowledge was transferred. And when you relate those two you find a sudden drop within a few kilometers. Largely. everybody was connected into to them. But. For example. and they run into old friends that they knew from their University days and they talk to one another or they ride in on the same subway train or they run into each other in the same parking lot or whatever it may be. communicate with all the other companies? And so now you have two measures for each company: they’re average distance and their level of communication with those other companies. the role of the major pharmaceutical companies. how much did that focus company. We tested it still another way to see whether there was any affect from physical proximity.org . they were looking for license opportunities or acquisition opportunities. 2563 Kingston Road. although I can’t really test that. because they were active in going out and trying to make contact with the small companies. There is a bigger error in that we measured the distance between the companies but we did it ‘as the crow flies’ we didn’t measure around corners or anything. You find. as I think I said already. Cleveland.iopen. But most of the work. Some of that I think is due to the fact that the companies are generally pretty small and as a result they don’t have any dining facilities. now that obviously is the location of the front door. Institute for Open Economic Networks (IOpen).0 AttributionNoncommercialNo Derivative Works. you can ask things about the role of the Universities. I believe it’s a function of small size companies. They were all obviously trying to expand into biotechnology and there is a lot of technology available in these small companies. that the Universities are a major factor because that’s where most of the companies have their origins.” If you place a simple graph theory measures to it you find the companies within the geographic cluster are more central to the network than are other companies. Then. most of the companies had their origins in either Harvard Medical School or MIT. We obtained the latitude and longitude of each of the companies in the sample. a lot of companies came out of Boston University.
php?in_spseqno=267&co_lis t=F Research • Wikipedia http://en. You can view the video interview at http://www. • He is the creator of the Allen curve.org . 2563 Kingston Road. We need to know more about that. and the codirector of the MIT Leaders For Manufacturing program. both the large biotechnology companies by the way and the traditional pharmaceutical companies seem to play a significant role. one of the companies that we were studying was very optimistic about their growth for a few years. Our generous thanks to Tom Allen. they have central positions in the networks and I think they are critical to developing the network and developing the communication and making these clusters effective. and helped that company to build its network with the companies that were working and they spread out pick up jobs all over the area.com/iopen/video?clipId=flv_5fc905c1198248c6acb61f72 93e7f9de Biographical Information • Margaret MacVicar Faculty Fellow • Howard W. interestingly enough. Cleveland. Institute for Open Economic Networks (IOpen). Emeritus • Technological Innovation & Entrepreneurship (TIE) • Specializing in organizational psychology and management • http://mitsloan. one is. we all know the Universities are important and in different regions where they’ve tried to develop high technology clusters and this sort.wikipedia.0 AttributionNoncommercialNo Derivative Works. Now. didn’t go away mad turned out that they brought business back to the company that had fired them! And really built a network. So you see things like that going on here that are very interesting. Ireland. Allen is the Howard W. Creative Commons 3. the other part of it is the large companies. 2008) • The Organization and Architecture of Innovation: Managing the Flow of Technology. Johnson Professor of Management at the MIT Sloan School of Management. OH 44118 USA Website: http://www. I think that our data certainly supports that. the importance of the major pharmaceutical companies being here.mit. But. they were doing very well. Publications • Tom Allen and the Allen Curve “Creating the right space to foster a spirit of innovation” Irish Times. Johnson Professor of Management. The scientists who were laid off. October 2006 Copyright 20052015 IOpen. I think.livestream. an approach to measuring and modeling the performance of crossfunctional research and development teams.org/wiki/Thomas_J. but they were a little too optimistic and they over hired and ended up with more staff than the business really could carry and they had a fairly substantial layoff.are so close together and that promotes communication. a little [observation] we ran across. just how it works. of course it has to built around a major University.edu/faculty/detail.iopen. by Frank Dillon (December 8. Coauthored by Gunter Henn. But. ButterworthHeinemann. Interesting. when we look at the networks. what else did we learn from it? Well. and I think that’s true._Allen • Thomas J.
edu Support Staff Name: Joanne McHugh Tel: 6172530586 Email: jamchugh@mit. Tom Shields. OH 44118 USA Website: http://www. Fred Stahl.iopen. Palgrave Macmillan 2002 Contact information Office: NE25758 Tel: 6172536651 Fax: 6172533331 Email: tallen@mit. Joel CutcherGershenfeld.• • Lean Enterprise Value: Insights from MIT's Lean Aerospace Initiative Coauthored by Earll Murman. Hugh McManus.org . Eric Rebentisch. Cleveland. Kirkor Bozdogan. Myles Walton. Stanley Weiss. 2563 Kingston Road. Deborah Nightingale. Institute for Open Economic Networks (IOpen).edu Copyright 20052015 IOpen. and Sheila Widnall. Creative Commons 3.0 AttributionNoncommercialNo Derivative Works. Joyce Warmkessel.
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