Biotechnology Entrepreneurship

Foundations and Trends R
in
Entrepreneurship
Vol. 8, No. 2 (2012) 63–140

c 2012 H. Patzelt, L. Schweizer and J. Behrens
DOI: 10.1561/0300000041
Biotechnology Entrepreneurship
By Holger Patzelt, Lars Schweizer
and Judith Behrens
Contents
1 Introduction 65
2 Definitions and Concepts 68

2.1 Categorization of Biotechnology Firms 69
2.2 The Biopharmaceutical Value Chain 70
3 Regional-Level Research on
Biotechnology Entrepreneurship 73
3.1 Biotechnology Networks 74
3.2 Biotechnology Clusters 75
3.3 Policy and Biotechnology Development 79
4 Firm-Level Research on
4.1 Strategies and Business Models of Biotechnology Firms 83

4.2 Strategic Alliances 90
4.3 Mergers and Acquisitions of Biotechnology Firms 99
5 Individual-Level Research on
5.1 Scientists in the Biotechnology Industry 107

5.2 Strategic Decision Making and
Top Management Teams 109
6 Future Research and Conclusion 113

6.1 Future Research at the Regional Level 113
6.2 Future Research at the Firm Level 115
6.3 Future Research at the Individual Level 116
6.4 Future Research Covering Multiple Levels of Analysis 118
References 121
Foundations and Trends R
in
Entrepreneurship
Vol. 8, No. 2 (2012) 63–140

c 2012 H. Patzelt, L. Schweizer and J. Behrens
DOI: 10.1561/0300000041
Holger Patzelt1 , Lars Schweizer2

and Judith Behrens3
1
Technische Universität München, Karlstr. 45, 80333 Munich, Germany,
patzelt@tum.de
2
Goethe University Frankfurt, Grueneburgplatz 1, 60322 Frankfurt am
Main, Germany, l.schweizer@em.uni-frankfurt.de
3
Technische Universität München, Karlstr. 45, 80333 Munich, Germany,
judith.behrens@tum.de
Abstract
Biotechnology is one of the strongest growing industries of the twenty-
first century. Yet, the sector is still young and many biotechnology
firms are at an early stage of their life cycle. Thus, biotechnology and
entrepreneurship are intrinsically linked together, and over the last
years a substantial number of articles in the entrepreneurship literature
have studied biotechnology at the regional, firm, and individual level
of analysis. This monograph reviews the literature on biotechnology
entrepreneurship. First, at the regional level, we focus on innovation
networks and biotechnology clusters. Second, at the firm level, we illus-
trate strategies and business models of biotechnology firms and the
determinants of their success. We also elaborate on strategic alliances of
biotechnology ventures, and on mergers and acquisitions in the biotech-
nology industry. Third, at the individual level of analysis, we review the
literature on strategic decision making in the biotechnology industry
and the role of the management team for biotechnology ventures’
development. We conclude our review by offering future research oppor-
tunities within and across levels of analysis for scholars interested in
the field of biotechnology entrepreneurship.
1
Introduction
Over the last 35 years, the biotechnology industry has been booming.
Since the inception of Genentech — which is often referred to as the
first modern biotechnology firm — in 1976, many thousands of new
biotechnology ventures have been founded, and some of these ventures
have been extraordinarily successful. For example, Genentech’s mar-
ket capitalization was $100 billion in 2012, and the firm employed
more than 11,000 people. Similarly, firms like Amgen (founded in
1980; market capitalization $53 billion in 2012; 17,000 employees) and
Biogen (founded in 1978; market capitalization $28 billion in 2012; 5000
employees) are not small firms anymore but global players. These and
other firms have been so successful because they have developed and
commercialized radically new technologies based on scientific advance-
ments that improved our understanding of cellular processes at the
molecular level. For example, based on the scientific breakthrough of
recombinant DNA technology, Genentech was first to produce insulin
from bacteria to treat human diabetes.
Today the biotechnology sector has a substantial economic impact.
The global biotechnology market had total revenues of $200 billion
in 2009, representing a compound annual growth rate of 10.2% for the
65
66 Introduction
period spanning 2005–2009. Further, US biotechnology firms employed

about 112,000 people and European biotechnology firms about 31,000
people in 2010 (Ernst and Young, 2011). Due to these impressive
numbers, biotechnology has attracted considerable attention not only
from policy makers, but also from academic researchers. For exam-
ple, a number of studies have investigated how governments can cre-
ate regional environments that trigger the formation of a biotechnology
industry. This research has found that regional clustering of biotechnol-
ogy ventures, universities, investors, and incumbent firms can stimulate
biotechnology development (e.g., Audretsch and Stephan, 1996, 1999;
Cooke, 2002; Stuart and Sorenson, 2003a,b; Zucker et al., 1998). Other
studies at the regional level have investigated how trans-organizational
networks in the biotechnology sector are organized (e.g., Liebeskind
et al., 1996; Maurer and Ebers, 2006; Powell et al., 1996), and the role
of policy and national innovation systems in the formation of networks
and clusters (e.g., Chaturvedi, 2007; Dodgson et al., 2008; Dohse, 2000;
Kaiser and Prange, 2004; Lehrer, 2007; Phene et al., 2006).
Further, as the examples of Genentech and others illustrate, the
successful development and commercialization of biotechnological
techniques can form the basis for new firms’ overwhelming success.
Indeed, biotechnological techniques have substantially triggered the
research output and productivity in many industrial sectors. For
example, recent industry statistics suggest that the biotechnology
industry discovers roughly two times as many new drugs as the
traditional pharmaceutical industry, but spends only one quarter as
much on R&D (Ernst and Young, 2011). However, many biotechnol-
ogy firms never bring a product to market and fail to successfully
commercialize their technology. One reason for these frequent failures
is that the biotechnology ventures’ environment is highly dynamic
and competitive (Fildes, 1990; Greis et al., 1995), and that bringing
biotechnological products to market is therefore one of the most
complex managerial challenges. Moreover, new product development
costs and product failure rates are substantial (DiMasi et al., 2003;
Evans and Varaiya, 2003), illustrating that biotechnology can be char-
acterized as a high-risk industry. The development process requires
on average more than $100 million and 10 years of R&D investment
67
(DiMasi et al., 2003). Moreover, only one out of 5000 initial drug
candidates reaches market launch (Evans and Varaiya, 2003). Due to
the environmental conditions and the complexity of newly developed
biotechnological methods, managing a biotechnology firm is a highly
complex endeavor. Understanding the factors that contribute to the
success of biotechnology ventures has been an important research
avenue for researchers from the field of strategy and entrepreneurship.
Finally, some studies have focused on the individuals starting and
managing biotechnology ventures. Many of these individuals are dif-
ferent from entrepreneurs outside the biotechnology industry since in
addition to managerial and entrepreneurial skills they need to possess
substantial scientific knowledge to assess both the technological fea-
sibility and the commercial potential on new biotechnological devel-
opments. Indeed, many biotechnology entrepreneurs are professors at
research institutions (Audretsch and Stephan, 1996, 1999; Zucker et al.,
1998) who when becoming entrepreneurs often face problems in the
development of their shared occupational identities, the distribution
of their limited time between research and entrepreneurship, and the
acquisition of managerial skills required to run a startup firm.
The purpose of this monograph is to review past research on biotech-
nology at different levels of analysis. As for most reviews, we cannot
be exhaustive on the studies included. Rather, our goal is to high-
light important research streams that scholars have pursued over the
last two decades and illustrate some key findings. In the following
section we introduce important definitions and concepts which are
necessary for readers new to the field of biotechnology entrepreneur-
ship to understand (some of) the studies subsequently introduced. We
then summarize work on biotechnology entrepreneurship at the regional
level. Next, we extend our review to the firm and individual levels of
analysis, respectively. Finally, we highlight future research opportuni-
ties in the field of biotechnology entrepreneurship within and across
levels, and draw final conclusions.
2
Definitions and Concepts
The term “biotechnology” is widely used and covers a number of dif-

ferent technologies. A commonly used definition of modern biotechnol-
ogy is provided by the consulting company Ernst and Young. Ernst
and Young were the first to regularly publish detailed reports on the
biotechnology industry, starting in 1986 for the sector in the US and,
later, also covering Europe, Asia, and some specific countries (e.g.,
UK, Germany). Therefore, Ernst and Young’s (2000, p. 7) definition of
biotechnology is widely accepted by both practitioners and academics:
“The term “modern biotechnology” refers to all innova-

tive methods, processes, or products, which include the
use of living organisms or their cellular compartments
and draw on the results and knowledge generated from
research in the fields of biochemistry, molecular biol-
ogy, immunology, virology, microbiology, cell biology, or
environmental and engineering sciences.”
To offer more detailed pictures of biotechnology and of firms active in

this field, Ernst and Young (2000) further categorize technologies and
firms. Since these categories have also been used by some academic
researchers, we briefly describe them below.
68
2.1 Categorization of Biotechnology Firms 69
2.1 Categorization of Biotechnology Firms

First, there are three categories of biotechnology firms according to
their size and dedication to biotechnological methods. “Entrepreneurial
Life Sciences Companies” (ELISCOs) are the prototype of biotechnol-
ogy firms in the Anglo-Saxonian countries. ELISCOs are “small and
medium sized companies, the business objective of which is exclusively
to commercialise modern biotechnology” (Ernst and Young, 2000, p. 6).
Typically, these firms are financed by venture capital and are led by
management teams consisting of scientists and entrepreneurs. Most
academic studies focus on ELISCOs. The second category is com-
prised of small and medium-sized enterprises (SMEs) which are called
“Extended Core Companies” and employ less than 500 employees.
These firms do not focus on biotechnology only, but generate more
than 50% of their revenues using biotechnological processes, products,
or services. Firms in Ernst and Young’s third category cover large cor-
porations with more than 500 employees which generate a “substantial
part of their revenues from modern biotechnological products and prod-
ucts for biotechnological research and production, respectively” (e.g.,
pharmaceutical firms) (Ernst and Young, 2000, p. 6).
Further, there is heterogeneity between firms with respect to
their technological basis and their technology’s purpose. First, firms
operating in “red” biotechnology develop products for human health-
care such as therapeutics, molecular diagnostics, drug delivery sys-
tems, or tissue engineering products. Second, “green” biotechnology
firms focus on the development and production of agricultural prod-
ucts including transgenic plants and food. Although the global market
potential of this sector is huge (given population growth and climate
change), the prevalence in each country is highly dependent on national
regulations (Ernst and Young, 1998, 2005). To date, only few academic
studies have focused on green biotechnology firms. Finally, firms in
the field of white (or grey) biotechnology develop and commercialise
biotechnological processes and products such as speciality chemicals
and enzymes, and offer research and development services for the phar-
maceutical, chemical, and food industries. Given the increasing inter-
est in, for example, energy efficiency and environmental technology,
70 Definitions and Concepts
this sector has been growing substantially over the last decade. Since
red biotechnology is however believed to have the most substantial
economic impact, almost all academic studies in the entrepreneurship,
management, and economics literatures investigate firms belonging to
this sub-sector (for exceptions see Hu et al., 2009; Vanloqueren and
Baret, 2009). Thus, our review article will focus on studies in the red
biotechnology field.
Finally, another important distinction between biotechnology
firms refers to the business models they pursue. Ernst and Young
(2000) distinguish between three archetypical business models. First,
product-oriented firms develop and commercialize new biotechnological
products such as therapeutics and diagnostics (red biotechnology),
transgenic plants (green biotechnology), or enzymes (white biotechnol-
ogy). Second, service firms use an innovative biotechnology to offer its
application to other companies as a research service. As compared to
product firms, service firms generate revenues much earlier in their life
cycle and sometimes grow without or with only minor outside invest-
ment. Third, some biotechnology firms use their proprietary technology
for both internal new product development and offering its application
as a research service to others (“hybrid companies”) (e.g., Patzelt et al.,
2008b).
2.2 The Biopharmaceutical Value Chain

The scientific breakthroughs of (red) biotechnology constituted a
radical change from previously dominant technologies in the pharma-
ceutical industry, thus reducing the value of existing competencies. As
a result, “biotechnology is a dramatic case of a competence-destroying
innovation” (Powell and Brantley, 1992, p. 368). For biopharmaceutical
firms, the value chain starts with the identification of a target molecule
the depletion or malfunction of which in the living organism might be
the cause of a particular disease. To identify and validate such potential
targets, a variety of scientific skills and techniques (e.g. in chemistry,
biochemistry, biophysics) is required. The result of this first step of the
biopharmaceutical value chain is a validated target molecule that is
causal for the development of the disease targeted.
2.2 The Biopharmaceutical Value Chain 71
In the next step of the value chain lead molecules to address the tar-
geted disease are identified and optimized. Lead molecules are chemical
entities, proteins, nucleotides or antibodies that interact with, inhibit,
or replace the identified target. These lead molecules are potential can-
didates for new drugs. Subsequently, new chemical entities must be syn-
thesized and repeatedly modified to ensure specific and strong binding
to the target, requiring competencies in chemistry (lead optimization).
When it comes to protecting the identified lead molecule from imita-
tion by competitors, legal knowledge can facilitate the application for
patents — one of the most important resources for biopharmaceutical
firms (Powell and Brantley, 1992; Powell, 1996).
In the next step, pre-clinical testing for physiological safety and effi-
cacy in animals takes place. These tests require biological and medical
knowledge about animal behaviour and the structure and properties
of the tissue to investigate. Lead molecules that pass the latter stage
are subsequently tested in three clinical phases in humans. In clinical
Phase I trials a small group of healthy volunteers receives treatment
with the new drug candidate. In clinical Phase II a placebo-controlled,
large scale study is conducted with the goal of proving drug safety
and efficacy among a substantial number of people. Phase III clin-
ical trials are double-blind and placebo-controlled studies to further
establish the efficacy of the new drug on a statistically significant level.
Taken together, these three phases usually last several years. Moreover,
the clinical development process is highly regulated and requires legal
know-how to gain regulatory approval. Very often, biotechnology firms
perform Phases II and III clinical testing together with large pharma-
ceutical incumbent firms to share development risks and costs (Hsu,
2007; Zhang, 2011). Once the drug development process has been com-
pleted, entering the pharmaceutical market successfully is everything
but easy (Bogner et al., 1996) as effective and efficient marketing and
distribution are essential for success (Hauser et al., 2006; Stremersch
and Van Dyck, 2009). In these cases, teaming up with a pharmaceutical
partner is an attractive option for many biotechnology firms.
In sum, the description of the biopharmaceutical value chain sug-
gests that this development process with its distinct stages and different
clinical phases requires specific capabilities, knowledge, and know-how
72 Definitions and Concepts
in very distinct areas of management, law, medicine, biosciences, and

chemistry. The research skills necessary to create new products are
found in biotechnology firms, whereas the cash needed for clinical trials
and worldwide marketing and distribution is located in pharmaceutical
companies. In industries characterized by rapid innovation, technolog-
ical complexity, and highly specialized skills and know-how, the pace
and magnitude of technological change may not allow firms to inter-
nally develop all the technologies and capabilities they need to remain
competitive so that networks, strategic alliances, joint ventures, as well
as mergers and acquisitions play an important role in the biotechnology
industry. We will discuss these innovative modes of organizing R&D in
the biotechnology industry later in more detail.
3
Regional-Level Research on
Biotechnology research at the regional level has primarily focused on

innovation networks covering biotechnology firms and other organi-
zations, and on the development of regional biotechnology clusters.
Innovation networks refer to links (alliances) between actors that
participate in the biotechnology innovation process and share resources
and activities. Specifically, actors of biotechnology networks include
dedicated biotechnology firms, large incumbent firms, and public
research institutions/universities (George et al., 2001; Haeussler, 2011b;
Rothaermel and Deeds, 2006; Saviotti and Catherine, 2008). It appears
that the biotechnology industry is one of the most networked industries
that exist. For example, in the European biotechnology industry, the
number of strategic alliances between firms rose by 200% from 1997 to
2001 (Ernst and Young, 2002), and Fisher (1996) reports that 20,000
alliances were formed in the US biotech sector between 1988 and 1996.
Therefore, the emergence of biotechnology networks and the effects of
these networks on the firms involved have been studied by a substan-
tial number of scholars from different disciplines (e.g., management,
sociology, industrial organization, etc.).
73
74 Regional-Level Research on Biotechnology Entrepreneurship
3.1 Biotechnology Networks

An important stream of literature has investigated why networks within
the biotechnology industry form. For instance, studies in the economics
literature have shown that the formation of networks significantly
increase the production of new knowledge in biotechnology (Furman
and Stern, 2011; Henkel and Maurer, 2010). Focusing on the role of
networks for the creation of knowledge in biotechnology firms, a sem-
inal article by Powell et al. (1996) proposed that in sectors where
access to complex knowledge and learning is crucial (as for biotech-
nology), networks covering universities, research institutes, and other
firms form the locus of innovation. That is, only when biotechnology
firms have extensive network ties with these organizations, they are able
to learn sufficiently to compete successfully in the market place. Using
longitudinal data on US biotechnology firms from 1990 to 1994, the
authors find broad support for their model and highlight the need for
biotechnology firms to develop a network containing multiple actors,
and to occupy a central position within that network. Other studies
have provided additional support for the importance of biotechnology
firms’ networks with respect to learning and innovation (Casper, 2007;
Eisenhardt and Schoonhoven, 1996; Liebeskind et al., 1996; Oliver,
2001; Orsenigo et al., 2001; Yu et al., 2011). Importantly, however,
these benefits of networking for biotechnology firms seem to depend on
geographic and regional characteristics of the network (Whittington
et al., 2009) and the characteristics of network actors (Lee, 2010).
Besides access to knowledge, networks provide additional benefits
for young biotechnology firms. For example, network ties can pro-
vide direct access to finance from both investors (Baum et al., 2000)
and large firms that act as partners in research and development
(Coombs and Deeds, 2000; Coombs et al., 2006). Further, networks may
indirectly ease biotechnology firms’ access to financial resources since
being associated with reputable network partners attracts investors
(Baum and Silverman, 2004; Gulati and Higgins, 2003). In addi-
tion, networks offer biotechnology firms access to scientific talent
(Casper and Murray, 2005) and production and marketing facilities
(Rothaermel, 2001a; Rothaermel and Deeds, 2004). If network con-
tacts have access to international partners, they can also facilitate
new biotechnology firms’ formation of international strategic alliances

(Al-Laham and Souitaris, 2008).
Closely related to networks is the concept of social capital. Social
capital “signifies an asset available to individual or collective actors that
draws on these actors’ positions in a social network and/or the content
of these actors’ social relations” (Maurer and Ebers, 2006, p. 262).
To investigate the configuration and evolution of entrepreneurial firms’
social capital over time, Maurer and Ebers (2006) use case studies of six
young German biotechnology firms. Their findings demonstrate that in
order to achieve high performance, biotechnology firms need to contin-
uously adjust their social capital to their changing resource needs along
the growth trajectory. For example, while for very young firms social
capital is mostly embedded in the scientific community, during the
business development phase ties to large incumbent firms become more
important. Failing or poorly performing firms appear to face either cog-
nitive or relational lock-in which prevents them to develop their social
capital in line with their needs. Indeed, for these firms existing social
capital and networks develop into a liability (Maurer and Ebers, 2006).
Finally, a stream of literature has paid particular attention to net-
works within a specific region. For example, in a seminal study Saxenian
(1996) investigated networks within Silicon Valley and found that firms
in that region organize decentralized and network centric. This form of
organization allows scientist employees to form scientific communities
across organizational boundaries and thus participate in new scien-
tific and technological advancements. Advancing this work, Almeida
and Kogut (1999) show that regional networks and the existence of
local labor markets lead to the localization of knowledge in a particu-
lar region. Although these studies focus on the semiconductor industry
and not biotechnology, they have implications for a phenomenon fre-
quently observed in the biotechnology context — the development of
regional clusters.
3.2 Biotechnology Clusters

Given the benefits of networking and the development of social
capital for actors in the biotechnology industry in general and young
biotechnology ventures in particular, the question arises how these net-

works are formed and maintained within and across regions. A frequent
phenomenon in the biotechnology industry is the co-location of network
actors and the formation of local biotechnology clusters. For example,
prominent biotechnology clusters exist in San Francisco, San Diego,
and Boston in the US, Oxford and Cambridge in the UK, Toronto and
Montreal in Canada, Munich in Germany, Rehovot in Israel, and the
Greater Zurich region in Switzerland. A variety of scholars has investi-
gated how these regional clusters emerge, and the effects of clustering
on the development of young biotechnology firms.
To understand why clusters form in the biotechnology industry
and the benefits of those clusters for network actors, some studies
have drawn on the theories of agglomeration externalities (Marshall,
1890) arguing that clustering increases economic efficiency for firms.
For example, biotechnology firms located in a cluster might share
information or the output of suppliers that provide them with chemi-
cals needed for laboratory work (Fornahl and Sorenson, 2008). Indeed,
younger firms with higher knowledge stocks appear to profit more from
agglomeration (McCann and Folta, 2011). While efficiency arguments
may to some extent explain the development of biotechnology clusters,
however, the majority of studies have used social network theory to
investigate how biotechnology clusters form and how firms can profit
from a cluster environment. These studies emphasize that network ties
within clusters facilitate the development of the biotechnology industry
by providing access to important resources including scientific knowl-
edge, human capital, and financial capital.
Biotechnology clusters typically emerge around universities and
high quality research organizations because new scientific knowledge
is often the starting point for the formation of new biotechnol-
ogy firms (Audretsch and Stephan, 1996, 1999). Studies have found
that many biotechnology ventures are (co-)founded by professors and
“star” researchers from universities and public research institutes who
contribute their scientific knowledge to the development of new firms
(Owen-Smith and Powell, 2004; Zucker et al., 1998). Further, to access
new scientific knowledge, biotechnology firms located in clusters fre-
quently establish research collaborations with departments at the local
university thus facilitating the development of new products (Deeds and

Hill, 1996; Oliver and Liebeskind, 1998; Powell et al., 1996; Rothaermel
and Deeds, 2006; Zucker et al., 2002). These collaborations with local
universities can also enhance the legitimacy of biotechnology ventures
(Deeds et al., 2004) and lower NPD costs (Kogut, 1988) through shar-
ing of R&D equipment, information, expertise, and personnel (Geisler,
1995; Geisler et al., 1990; Lewis, 1990). A recent study, however, found
that spatial proximity within a cluster does not necessarily trigger
knowledge flows between organizations; rather, this effect might depend
on the legal environment for innovation and technological similarities
(Tallman and Phene, 2007). The prominent biotechnology CEO Pyare
Khanna actively prevents knowledge flows within clusters by keeping
inventors in his firm in “organizational silos” (Fleming et al., 2007).
Spatial proximity to universities and research institutions also
allows young biotechnology ventures to attract human capital in terms
of scientific talent needed for research and development activities. High
quality employees are a crucial resource for many young ventures.
On the one hand, the young firm has little reputation and financial
resources to attract scientific talent by paying high salaries. On the
other hand, for small firms working at the technological frontier a
high quality workforce is crucial to keep up with technological devel-
opment (Audretsch, 2001). Building up social networks within a clus-
ter can help potential employees to resolve part of the uncertainties
associated with joining biotechnology startups because network con-
tacts can provide important private information about the startup’s
future potential. Further, in a cluster environment young ventures can
also attract employees from local small and large firms who bring with
them important tacit knowledge specific to the industry (Sorenson and
Audia, 2000).
Finally, being located in clusters can facilitate biotechnology
ventures’ access to financial capital. Although the market for venture
capital is global, research has shown that venture capitalists pre-
fer investments in firms located within driving distance (Gupta and
Sapienza, 1992). Furthermore, their social network contacts within a
cluster can help venture capitalists acquire private information needed
to assess potential investees in the region (Sorenson and Stuart, 2001)
which can contribute to developing a more positive picture of the

venture (Sorenson and Waguespack, 2006). Indeed, Stuart and Soren-
son (2003a) find a positive correlation between biotechnology firm entry
rates and the number of ventures capital firms in a particular region.
In addition to the networking effects within clusters, spatial
proximity appears to offer additional benefits for the foundation and
development of biotechnology firms. A study by Stuart and Sorenson
(2003b) investigated how IPOs and the acquisition of biotechnology
firms by large incumbents affect the foundation of new firms within
the same metropolitan area. The authors argue that when biotech-
nology firms go public, highly qualified employees of these firms can
sell their equity holdings,which provides them with the opportunity to
start a new firm again. Similarly, acquisitions might trigger the for-
mation of new biotechnology ventures in spatial proximity since high-
level employees may be motived to leave and start up a new due to
the changes in organizational routines and culture that are often the
consequence of combining two firms (Larsson and Finkelstein, 1999).
Using data on biotechnology founding rates within 308 Metropolitan
Statistical Areas in the US, Stuart and Sorenson (2003b) find support
for both hypotheses. These effects were contingent on the existence
of non-compete covenants within the Metropolitan Statistical Areas
which may prevent prospective entrepreneurs from leaving and found-
ing competing firms (Richey and Malsberger, 1996).
To investigate what contextual factors facilitate or counteract
successful development of biotechnology clusters, scholars have used
individual and comparative case studies in different institutional and
cultural environments based on rich and in-depth data. For example,
Cooke (2001a,b, 2002, 2003) has studied the infrastructure of biotech-
nology clusters in the US, UK, and Central Europe. These studies found
that, in contrast to traditional industry clusters, biotechnology clusters
offer an ‘extended campus’ milieu including universities, biotechnol-
ogy ventures and large firms. This milieu is necessary to provide an
atmosphere of creativity needed for innovative research and discovery
of radically new technologies. Further, a study on the biotechnology
cluster in Uppsala, Sweden, demonstrated that the local combination
of dominant pharmaceutical firms and biotechnology research at a
university can trigger cluster development (Waxell, 2009). A study by

Breznitz et al. (2008) showed that in the entrepreneurial environment
of Boston-Cambridge, a cluster policy offering little support is sufficient
to make the cluster successful, while at Yale where the entrepreneurial
environment is less developed, high levels of support are required.
Finally, while many of the studies on biotechnology clusters have
claimed and/or found that, due to the arguments provided above,
biotechnology firms profit from a cluster environment, some studies
have challenged this generally positive assessment of clustering. For
example, a study by Stuart and Sorenson (2003a) distinguished between
the entry of new biotechnology firms and the performance of recently
established firms and found that while spatial proximity to existing
firms increases the likelihood of entry, it also increases the time these
firms need to exit by IPO. In line with previous studies on geographic
competition (Baum and Mezias, 1992; Sorenson and Audia, 2000) the
authors argue that competing for resources (e.g., financial and human
capital) within a specific geographic area can diminish biotechnology
firms’ performance. Therefore, to both trigger new biotechnology firm
formation and facilitate the development of these firms afterwards,
a biotechnology cluster should “provide access to an extensive tech-
nical workforce, but [. . . ] not present intense local competition from
nearby biotech firms” (Stuart and Sorenson, 2003a, p. 250). Similarly,
Jonghoon et al. (2011) found that there is a curvilinear relationship
between the density of biotechnology firms in a region and the estab-
lishment of new firms. Interestingly, however, this effect is weaker when
existing firms maintain cooperative inter-firm relations that bridge geo-
graphically remote and diverse sources of knowledge, which then can
contribute to new firm initiation (Bae et al., 2011).
3.3 Policy and Biotechnology Development

In contrast to major clusters in the US and UK which have grown
over decades in proximity to famous universities like MIT, Stanford,
or Oxford without major political influence, in some regions pol-
icy makers have taken initiative to trigger the regional economy by
developing biotechnology clusters. The desire of politicians to foster
cluster development has been particularly driven by successful role

models such as the US biotechnology clusters focusing on the devel-
opment of human biotherapeutics (Romanelli and Feldman, 2006).
One example of policy-initiated cluster development is Germany.
Most German biotechnology clusters emerged from the ‘BioRegio-
Contest’, a national contest of regions competing for governmental
funding to develop a regional biotechnology industry. Dohse (2000)
offers an analysis of this approach and illustrated potential benefits
and problems. The study concludes that the value of the BioRegio
Contest is that it acknowledges regions as key actors in promoting
technological change and facilitates collaboration at a regional level.
However, Dohse also identified potential challenges of the contest
approach such as fundamental information problems associated with
governmental intervention, and that it does not address regulatory hur-
dles for biotechnology development at a national level. Further, while
the BioRegio Contest helped initiate new biotechnology ventures, it
did not promote the development of other organizations that these
ventures depend on during their development such as venture capital
firms. Indeed, due to these problems some authors have been quite crit-
ical of the BioRegio Contest as a means to foster regional biotechnology
cluster development (Giesecke, 2000). Similar to German clusters, the
recent development of biotechnology clusters in China has been heav-
ily stimulated by political intervention (Zhang et al., 2011). As for the
German approach, however, the Chinese governmental efforts suffer
from the lack of accompanying measures such as promoting the devel-
opment of a venture capital industry and adjusting regulations at the
national level (Prevezer, 2008). Nevertheless, driven by successful role
models particularly in the US, several other Asian countries includ-
ing Singapore, Taiwan, and South Korea have established a variety of
policy measures to promote biotechnology cluster development (Wong,
2011).
Although strongly initiated by policy measures, however, similar to
their counterparts in the US and the UK Central European and Asian
biotechnology clusters emerged in areas with a strong scientific knowl-
edge base. Interestingly, however, this is not always the case. A recent
case study by Trippl and Tödtling (2007) showed that policy-initiated
cluster development is also possible when firms draw on more distant

knowledge sources. Indeed, this study shows that small biotechnology
firms in the Tyrolean region in Austria acquire over 60% of their knowl-
edge from international contacts. In such regions, however, proactive
policy measures are required to establish incubators and spin-off cen-
ters that attract young firms. Thus, while high-level local knowledge
from research institutions and universities might be the seed for clus-
ter emergence in some regions, these institutions do not appear to be
an absolute prerequisite for biotechnology clustering given proactive
policy measures to stimulate cluster development. However, as Orsenigo
(2001) in a case study from Lombardy, Italy, demonstrates, sometimes
policy-initiated biotechnology clusters indeed fail to develop well due
to the lack of appropriate knowledge-creating institutions in place.
Albeit the studies above demonstrate the substantial efforts of
policy makers around the world to establish biotechnology clusters in
regions with and without local knowledge institutions, it is still a matter
of debate whether and how successful biotechnology clusters can be ini-
tiated by policy measures. For example, the most successful biotechnol-
ogy clusters in the US have emerged over time and were not initiated by
policy measures such as the BioRegio contest. Further, examples accu-
mulate which demonstrate the shortcomings of these political attempts
of cluster initiation and development (Giesecke, 2000; Orsenigo, 2001).
Therefore, the real value of policy in developing successful biotech-
nology clusters and whether and how the mechanisms leading to the
emergence of local networks can be stimulated are yet important topics
of future research.
Finally, some studies have taken a “National Innovation Systems”
(NIS) perspective on regional biotechnology development. An NIS
refers to “the set of organizations, institutions, and linkages for the gen-
eration, diffusion, and application of scientific and technological knowl-
edge operating in a specific country” (Galli and Teubal, 1997, p. 345).
As compared to most of the regional-level studies mentioned above,
studies taking an NIS perspective explicitly evaluate national institu-
tions. For example, Bartholomew (1997) compared the biotechnology
NIS in the US, UK, Japan, and Germany and found substantial national
differences regarding national research funding, technology policy, labor
mobility, provision of capital, university–firm collaborations, and the

facilitation of cross-border activities of biotechnology actors. Further,
there are substantial differences in national policies toward the com-
mercialization of science (Haeussler, 2011a) and the organization of
labor markets, corporate governance, and finance leading to different
ways of organizing within the firm [see, e.g., literature drawing on the
varieties of capitalism perspective, (Casper and Whitley, 2004)].
These differences explain, partly, the diverging development tra-
jectories of the biotechnology industry across countries. Indeed, due
to their fundamental differences, e.g. with respect to entrepreneurial
activity and the role of large firms in innovation, a couple of studies
have compared the US and the Japanese NIS with respect to their
impact on biotechnology development (Baba and Walsh, 2010; Ibata-
Arens, 2008). Other authors have focused on one particular country
such as Taiwan (Dodgson et al., 2008), India (Chaturvedi, 2007), the
US (Phene et al., 2006), Germany (Dohse, 2000; Kaiser and Prange,
2004; Lehrer, 2007), Korea (Cho et al., 2007), and China (Zhang et al.,
2011) to analyze the drivers and hurdles of the respective NSI for
biotechnology development. Indeed, in particular biotechnology devel-
opment in the BRIC countries has received increasing attention and
differences to Western innovation systems have been subject to recent
investigations (e.g., Bhaduri, 2008). For example, India has adopted
the Trade Related Intellectual Property Rights (TRIP) system, yield-
ing substantial developments in biotechnology (Bagchi-Sen and Smith,
2008; Bhaduri and Mathew, 2004). Due to both the internationality of
biotechnology markets and the emphasis on regional networks, however,
some authors have challenged the appropriateness of a national perspec-
tive on biotechnology and advocated an alternative perspective where
the NIS is reconfigured toward the subnational and international level
(Bartholomew, 1997; Kaiser and Prange, 2004).
In sum, biotechnology research at the regional level has had a strong
emphasis on understanding the substantial networking effects within
the industry. A particular interest has been on biotechnology clus-
ter development, both from a network and from a policy perspective.
Regarding the latter, an NIS approach appears to be useful to explain
why the biotechnology sector develops well in some regions but worse
in the others.
4
Firm-Level Research on
While research at the regional level is substantial, certainly most of the

research on biotechnology entrepreneurship has been conducted at the
firm level. At this level, research has investigated strategies and busi-
ness models of biotechnology firms, strategic alliances these firms form,
and mergers and acquisitions between firms. The pattern of inter-firm
collaboration in biotechnology is probably more extensive than in any
other industry (Arora and Gambardella, 1990; Barley et al., 1992; Pow-
ell, 1996; Powell and Brantley, 1992). In addition to that, the biotech-
nology industry is characterized by a social network structure requiring
a shift from coordinating the internal activities of the firm through a
traditional command and control structure to providing organizational
support for internal and external exchanges. In what follows we review
research on (i) strategies and business models, (ii) strategic alliances,
and (iii) mergers and acquisitions of biotechnology firms.
4.1 Strategies and Business Models of Biotechnology Firms

Biotechnology business is a cluster of interrelated industries, build-
ing upon knowledge-intensive scientific research, which is continuously
83
84 Firm-Level Research on Biotechnology Entrepreneurship
growing because of the dynamic interplay of a wide range of tradi-

tional disciplines and newly emerging ones. While luck and serendipity
have been major success factors in the pharmaceutical and biotechnol-
ogy sectors (Pisano, 2006) and constant innovation is most likely the
only source for sustainable competitive advantage, Carsrud et al. (2008)
highlight three key questions concerning the analysis of a biotechnology
firm’s strategy: (1) What kind of strategy supports the respective
market and commercial success? (2) Are there really technology-based
strategies or is it that research activities are hunting for money?
(3) What is a sustainable competitive advantage for a biotechnology
firm?
4.1.1 Strategic Orientation of Biotechnology Firms

For any innovative activity to become commercially successful a care-
fully developed business strategy is necessary. Carsrud et al. (2008)
describe four important strategy components for early stage biotech-
nology firms. (1) Market proactiveness implies that biotechnology firms
need to do market research on the commercialization of their products
or technologies right from the beginning. (2) Strategic fit requires that
biotechnology firms align their resource with the environment including
market needs. (3) Reactiveness requires that biotechnology firms not
only care about the next round of financing to continue their research
activities, but also develop a long-term oriented business model. (4)
Young biotechnology firms must move away from traditions and his-
tory which put the focus on achieving enough funding, but be able to
come up with new strategic moves like entering into a strategic alliance
or pursuing an M&A strategy.
To shed more light on the overall strategic orientation of biotech-
nology firms, Durand et al. (2008) explore the contrasting effects of
developing technological applications, entering alliances, and choosing
between research- or service-focused strategic orientations on rent gen-
eration and rent appropriation. These authors draw on data on the
entire population of French biotechnology firms. Their research find-
ings suggest that (a) technological application diversity undermines a
firm’s capacity to appropriate rents, in particular for research-oriented
firms, (b) exploitation alliances with incumbent firms favor rent gen-
eration but hinder rent appropriation, and (c) service-oriented firms
exhibit significantly better performance than research-oriented firms.
One interesting example how firms can move away from traditions
and history is the case of the Japanese Kirin Brewery introduced
by Lynskey (2008). Being traditionally a non-biotechnology incum-
bent firm, Kirin entered into the biotechnology sector via unrelated
diversification. The Kirin case stresses the importance of opportu-
nity recognition, tacit knowledge, entrepreneurial individuals, scientific
gatekeepers, and key collaborations (in the case of Kirin its joint
venture with Amgen) to successfully enter the biotechnology sector;
all of these factors are crucial for biotechnology ventures as well.
Lynskey (2008) concluded that Kirin followed a focused strategy by
concentrating on niche areas and specific technologies.
Technological specialization, however, is not always the key to
success of biotechnology ventures. For example, Quintana-Garcı́a and
Benavides-Velasco (2008) analyzed how technological diversification
influences the rate and specific types of innovative biotechnology com-
petencies. Their findings demonstrate that a diversified technology base
positively affects innovative competence in the biotechnology context.
In addition to that, technological diversification is found to have a
stronger effect on exploratory than on exploitative innovative capabili-
ties. As a consequence, their results suggest that technological diversity
may mitigate core rigidities and path dependencies by enhancing novel
solutions which accelerate the rate of invention.
While many other studies have illustrated that effective technolog-
ical development is the key to biotechnology ventures’ success, this
development needs to be embedded in the firm’s organizational struc-
ture — an issue which has attracted little attention by biotechnology
researchers so far. An exception is work by Huckman and Zinner (2008),
who analyze whether focus at the divisional level is complementary
with, or a substitute for, focus at the firm level by considering the per-
formance of investigative sites in biopharmaceutical clinical trials. Their
research findings show that firms focusing on a particular task, at either
a divisional or firm level, have higher output and productivity with
respect to that task than unfocused firms. Furthermore, they find that
sites that focus on conducting clinical trials significantly outperform

those that mix trial activity with the provision of traditional patient
care. In addition, they suggest that focus at the divisional level and
firm level are substitutes.
Finally, Stuart et al. (2007) focus on biotechnology firms’ organi-
zation and management of tripartite alliances — alliances in which
biotechnology firms enter upstream partnerships with public sector
research institutions, and later form commercialization alliances with
established, downstream firms. Their research findings suggest that
firms with multiple in-licensing agreements are more likely to attract
revenue-generating alliances with downstream partners. In a further
step, however, their results demonstrate that the positive relation-
ship between in-licenses and downstream alliances attenuates as firms
mature, and that the diversity and the quality of the academic
connections of biotechnology firms influences their chances of success-
fully acquiring commercialization rights to scientific discoveries in uni-
versities. Similarly, Fabrizio (2009) shows that the enhanced access to
university research by biotechnology firms that engage in basic research
and collaborate with university scientists leads to superior search for
new inventions and provides advantage in terms of the timing and
quality of research outcomes.
4.1.2 Business Models of Biotechnology Firms

A firm’s business model or paradigm describes how the firm operates
and interacts within the industry. Research has shown that in new high
technology industries the choice of the business model is an impor-
tant ingredient of organizational success. For example, the creation of
virtual markets and virtual communities as part of a firm’s business
model in the e-business industry can attract and bond customers with-
out geographic constraints (Amit and Zott, 2001). Some scholars even
argue that innovative business models create more value in young ven-
tures than the talents of the entrepreneurs themselves (Hamel, 1999).
In the context of biotechnology, Patzelt et al. (2008b) pointed out that
business models appear to be better suited to describe organizational
differences between firms than classical categorizations of strategies.
Given high R&D expenses, it is important for all biotechnology firms

to focus on a narrow selection of products and markets (Casper, 2000).
Moreover, most biotechnology firms are young and rather small com-
panies that do not have yet many formal structures or high levels of
hierarchy. Instead, biotech firms have created their own entrepreneurial,
creative, and risk-taking culture and are organized flexibly in overlap-
ping, interdisciplinary project teams with low levels of hierarchy, open
communication, and informal organizational structures, thus creating a
dynamic, lean, and effective organization fostering innovation (Powell,
1996).
Based on these assumptions, Schweizer (2006) identified five key
questions that are important with respect to understanding biotech-
nology firms’ business models:
(1) How can the competitive advantage of the biotechnology firm
be explained?
(2) How is the value chain of the biotechnology firm configured?
(3) Which rules are applied by the pharmaceutical incumbents?
(4) Are there possibilities to change the rules of the competition
game?
(5) What is the revenue model of the biotechnology firm?
To further specify business models of biotechnology firms, Casper
(2000) distinguished between firms developing biotherapeutic products
(drugs) and firms focusing on platform technologies. The categorization
of Casper (2000) is in line with practitioner-oriented literature, which
calls the underlying business models “product” and “service” model,
respectively (Ernst and Young, 2002).
First, therapeutics firms are dedicated to the development of bio-
therapeutic drugs whose development is expensive, time-consuming,
and risky. However, revenue perspectives are huge and successfully
launched blockbuster drugs can generate hundreds of millions $US
per year. Given the limited resources of young biotechnology firms,
therapeutic firms heavily engage in strategic alliances. Moreover,
these firms face a considerable competence destruction risk because
different development projects often require specific knowledge and
competencies (Casper, 2000).
In contrast, platform firms either sell their technologies at the

market or perform classical fee-for-service business with customers.
Thus, platform firms need to develop a network of contacts to potential
customers. Given that their basic proprietary technology is often well-
developed from the very beginning, many service-oriented biotechnol-
ogy firms quickly start to generate revenues, so that they face generally
lower financial risks than therapeutics biotechnology firms (Casper,
2000). Compared to therapeutic firms, platform firms face considerably
lower competency destruction risks than therapeutics firms as their
basic technology is usually well developed.
Given the different characteristics of therapeutics and platform
firms, different competencies are required within the firms’ management
teams to achieve high performance. Specifically, Patzelt et al. (2008b)
demonstrated that founder-based firm-specific experience of manage-
ment team members can have either a positive or negative effect on
performance, depending on whether the venture pursues a platform or
a therapeutics business model, respectively. Moreover, their research
findings suggest that managers’ experience gained in the pharmaceuti-
cal industry has an overall positive effect on performance, but that this
effect is even more positive for therapeutics-oriented than for platform-
oriented biotechnology firms.
Schweizer (2005a) developed an alternative typology of biotech-
nology business models along the dimensions of (1) value chain
constellation, (2) market power of innovators versus owners of comple-
mentary assets, and (3) total revenue potential. His typology consists of
four different types of business models (integrated, layer player, market
maker, and orchestrator model). In a subsequent study, Schweizer
(2006) analyzed how biotechnology companies evolve from one model
to another. As the competitive situation changes either due to internal
drivers (e.g., desire for greater revenues or company growth) or exter-
nal drivers (e.g., competence-destroying technologies), firms reconsider
their existing business model and adopt it. Thus, Schweizer (2005a,
2006) identified the following four types of business models in the
biotechnology industry:
(1) Some young biotechnology venture mainly focus on the capa-

bilities within one of the steps of the value chain resulting in a
growing number of Contract Research Organizations (CRO)

and Contract Manufacturing Organizations (CMO), leading
to the Layer Player Model. Choosing this approach involves
the advantage of generating scarce financial resources during
the first years of the start-up process by specializing in one
specific step of the value chain.
(2) The Market Maker Model, because of its function to bring
transparency into markets, refers largely to the increasing
importance of information. In the biotechnology sector, infor-
mation is hardly accompanied by technology and in this
manner the market making process relies much more on
offerings developing or using state of the art technology
to enhance actual processes by, e.g., converting information
encrypted by the DNA into biomedical knowledge.
(3) If one step of the value chain is better executed by the
market, and does not belong to the core competencies of the
firm, the consequence will be an outsourcing of the respec-
tive step leading to the Orchestrator Model. A biotechnology
firm that uses the Orchestrator Model as its business model
concentrates on one or a few steps of the bio-pharmaceutical
value chain, has a high total revenue potential, and has access
to all relevant complementary assets via collaborations and
strategic alliances.
(4) A biotechnology firm that uses the Integrated Model as its
business model covers the complete bio-pharmaceutical value
chain, has a high total revenue potential, and has access to
all relevant complementary assets in-house.
Finally, Sabatier et al. (2010a) go beyond the notion that firms pur-
sue one business model only and introduce the concept of a business
model portfolio — pursuing multiple business models at the same time.
Analyzing different business models of four European biotechnology
companies, they explore their business model portfolios, defined as the
range of different ways they deliver value to their customers to ensure
both their medium term viability and future development. They con-
clude that a firm’s business model portfolio can help to balance out the
levels of promise and interdependency with other firms of its different
business models, and help to articulate and finance its activities in the
medium run to ensure idiosyncrasy and future survival. In a subsequent
study, Sabatier et al. (2010b) conclude that, as the biotechnology sec-
tor evolves, coordination of networks can be specialized, leading to the
emergence of Dedicated Coordinating Firms.
Interestingly, it appears that business models of biotechnology firms
vary substantially across national contexts. A couple of studies analyzed
the development of biotechnology business models in different countries
(Bigliardi et al., 2005). Suuma (2011) analyzed the case of Estonia and
argued that the development of biotechnology business models in Esto-
nia is led by two rather contrary directions: on the one hand, increasing
specialization and fragmentation and, on the other hand, movements
toward geographical and institutional convergence. Konde (2009) pro-
vided an Indian perspective and points out that Indian firms focus their
businesses on the development, manufacturing, and marketing of bio-
pharmaceuticals and provide services by leveraging their cost-effective
manufacturing capabilities to gain more market share and compete on a
global scale. Willemstein et al. (2007) investigated the business model
dynamics of Dutch medical biotechnology firms and concluded that
both the generation of new firms, due to shifts in the dominating busi-
ness model at founding over time, and shifts in business models after
founding, explain business model dynamics. Finally, in specific context
of the Italian biotechnology sector, Bigliardi et al. (2005) identified
four clusters to group biotechnology firms: service companies, small
research companies, traditional integrated firms and industrialized inte-
grated firms. Therefore, while business models in the biotechnology sec-
tor share some elements, there is considerable variation between firms
operating in different institutional contexts (countries).
4.2 Strategic Alliances

Given that the rate of inter-organizational alliances between firms
has accelerated in multiple industries (Gulati, 2007), scholars have
shown increased interest in topics around the formation, manage-
ment, and performance of strategic alliances from the firm’s perspective
(Hagedoorn, 1993). In what follows, we will first illustrate the motives
for biotechnology firms’ alliance formation, and subsequently review

these alliances’ effects on firm performance.
4.2.1 Motives for Alliances in the Biotechnology Industry

In the biotechnology industry, many firms enter into strategic alliances
in pursuit of knowledge and further complementary resources. For
example, Powell et al. (1996) develop a network approach to organi-
zational learning and derive firm-level, longitudinal hypotheses that
link research and development alliances, experience with managing
inter-firm relationships, network position, rates of growth, and port-
folios of collaborative activities. The authors find support for the view
that alliances provide entry to a field in which the relevant knowl-
edge is widely distributed and not easily produced inside the firm. In
a further study, Powell (1998) extends this view and analyses learning
from collaboration in the pharmaceutical and biotechnology industry
considering the competition in these industries as a “learning race”. He
argues that learning from collaboration is both a function of access to
knowledge and possession of capabilities to make use of them. In a sub-
sequent study, Powell et al. (2005) analyze the structure and dynamics
of inter-organizational collaboration in biotechnology and show how
the formation, dissolution, and reformation of alliances have shaped
the opportunity structure of the field. Along similar lines, Baum and
Silverman (2004) find that biotechnology startups in the Canadian
sector can improve their performance by establishing alliances, by
configuring them subsequently into an efficient network which pro-
vides access to diverse information and capabilities, and by allying with
potential rivals that provide more opportunities for learning and less
risk of intra-alliance rivalry.
While alliances are formed between firms, human resources of these
firms play a crucial role in the alliance formation process. For example,
Luo et al. (2009) develop an integrative framework to separate the
productive and legitimating effects of scientists on strategic alliance for-
mation of firms and show that scientists serve more than just a research
function in the biotechnology industry. Their results show a positive
relationship between ratio of scientists and R&D alliance partners as
well as a positive relationship with finance alliance partners. Moreover,

they find that scientists influence partner attraction more strongly for
firms that are less well-connected, and scientists become less promi-
nent in fostering finance ties as the biotechnology industry practice of
partnership becomes more institutionalized. In their study of 108 phar-
maceutical firms over a 30-year period, Hess and Rothaermel (2011)
show that any performance effects of star scientists on firm innova-
tion are contingent upon the stars’ connections to other firm-specific
resources. Moreover, they find a substitutive relationship between
the number of a firm’s star scientists and upstream alliances with
universities.
To better acknowledge the different nature of alliances biotechnol-
ogy ventures form, Rothaermel and Deeds (2004) link the exploration–
exploitation framework of organizational learning to a technology
venture’s strategic alliances. They argue that the causal relationship
between the venture’s alliances and its new product development
depends on the type of the alliance. Consequently, Rothaermel and
Deeds (2004) propose a product development path starting with explo-
ration alliances predicting products in development, which in turn
predict exploitation alliances, ultimately leading to products on the
market. They also find a moderating effect of firm size: as a biotechnol-
ogy start-up grows, the venture tends to withdraw from this product
development path to discover, develop, and commercialize promising
projects with the help of vertical integration.
Since alliances with incumbent firms are the most important
way of finalizing the product development process and commercial-
izing the product for many biotechnology firms, these downstream
alliances have attracted considerable scholarly attention. For instance,
Rothaermel and Boeker (2008) analyze factors that lead to alliance for-
mation between pharmaceutical and biotechnology companies, i.e., why
firms choose to ally with specific firms given the range of possible
partners they may choose from. Their research results suggest that
a pharmaceutical and a biotechnology firm are more likely to enter
an alliance based on complementarities when the biotechnology firm is
younger. Moreover, Rothaermel and Boeker (2008) find that proxies for
broad capabilities appear to be at least as effective in predicting alliance

formation compared to fine-grained science and technology-related indi-
cators, like patent cross-citations or patent common citations. Finally,
Rothaermel (2002) analyzes the factors that determine a biotechnology
startup’s attractiveness as an alliance partner. He finds that the new
venture‘s rate of new product development, economies of scale, public
ownership, and geographic location in a regional technology cluster are
positively associated with the startup’s attractiveness as an alliance
partner.
Focusing on the side of the incumbents rather than the biotechnol-
ogy startups in downstream alliances, Rothaermel (2001a,b) analyzes
inter-firm cooperation between incumbents and new entrants in the
biopharmaceutical industry as a mechanism for incumbents to adapt
to radical technological change through exploitation of complementary
assets. Rothaermel (2001a) shows that an incumbent’s alliances with
biotechnology firms are positively associated with the incumbent’s new
product development and, in turn, new product development is posi-
tively associated with firm performance. Rothaermel (2001a) finds that
incumbents exhibit a preference toward alliances that leverage com-
plementary assets (exploitation alliances) over alliances that focus on
building new technological competencies (exploration alliances), and
that the cooperation between incumbents and new entrants may lead
to an improvement in the performance of the incumbent. In a further
step, Rothaermel (2001b) demonstrates that incumbents that focus
their network strategy on forming alliances to exploit complementary
assets outperform incumbents that seek primarily alliances to explore
new technological paths.
On a more abstract level, building legitimacy is crucial for young
biotechnology firms as they do not have the validation associated with
significant experience with respect to the quality of the biotechnology
product or service. Thus, strategic alliances with prominent partners
can be considered as one of the most promising routes to legitimacy for
biotechnology firms. Baum and Silverman (2004) examine whether ven-
ture capitalists (VCs) stress picking winners or building them by com-
paring the effects of startups’ alliance, intellectual, and human capital
characteristics on VCs decisions to finance them. Their research find-

ings suggest a joint logic that combines the roles: VCs finance startups
that have strong technology, but are at risk of failure in the short
run, and thus are in need of management expertise. In line with that,
Stuart et al. (1999) show that young biotechnology firms which are
backed-up by prominent exchange partners will perform better than
comparable ventures which lack prominent partners. Their results sug-
gest that privately held biotechnology firms with prominent strategic
alliance partners go to IPO faster and earn greater valuations at IPO
than firms that lack such connections. Moreover, they demonstrate that
much of the benefit of having prominent alliance partners comes from
the transfer of status as an inherent byproduct.
In a further step, Nicholls-Nixon and Woo (2003) also show a pos-
itive effect in terms of status and reputation for the pharmaceutical
alliance partner. They find that by forming more R&D contracts and
licensing agreements with biotechnology firms, pharmaceutical compa-
nies are associated with stronger reputation for possessing expertise
in biotechnology. Similarly, Gopalakrishnan et al. (2008) find that the
credibility of a pharmaceutical firm is positively associated with the
extent of financial capital acquired by the biotechnology firm when
forming an alliance with pharmaceutical firms.
4.2.2 Management and Performance of

Biotechnology Alliances
In the biotechnology sector, many studies emphasize the strong
influence of homophily — similarities among firms, fostering mutual
trust and identification and, thus, increasing the likelihood of a com-
mon partnership. For example, Powell et al. (2005) demonstrate that
biotechnology firms follow a process in which new partners are chosen
on the basis of their similarity to previous partners. Similarly, Kim and
Higgins (2007) analyze the extent to which young firms and partners
match along specific homophily dimensions. Their research results show
that alliance formation is related to status homophily and role-based
homophily between young and established organizations. As a conse-
quence, biotechnology firms having similar market positions as well
as similar obligations and expectations are drawn toward each other.

Luo and Deng (2009) propose a more fine-grained view in the way
that similar partners in a focal biotechnology firm’s alliance portfolio
contribute to the firm’s innovation up to a certain threshold. Beyond
that point, collaborating with additional similar partners can lead to a
decrease in innovation because of the trade-offs embedded in collabo-
ration between similar partners.
Beyond homophily between alliance partners and its implications,
the governance of alliances has been an important topic in biotech-
nology research. Santoro and McGill (2005) demonstrate that the
governance of biotechnology alliances is influenced directly by partner,
task, and technological uncertainty, and by interactions among asset co-
specialization, partner uncertainty, and task uncertainty. Specifically,
co-specialized assets increase the likelihood of hierarchical governance,
while technological uncertainty decreases the likelihood of hierarchi-
cal governance. In a further study, McGill and Santoro (2009) show
that the choice to engage in alliances with lower technological uncer-
tainty and the decision to use more hierarchical means of management
positively affect the alliance’s performance.
Sytch and Bubenzer (2008) emphasize the importance of main-
taining strategic flexibility with regard to the choice of the alliance
governance form. This initial flexibility provides firms with the possi-
bility to change the governance form along the way by increasing their
commitment as the partnership becomes more promising. Based on a
real option theory framework, Folta and Miller (2002) demonstrate that
biotechnology firms tend to acquire additional equity in their partner
firms when their partners’ market valuations are increasing. These find-
ings are further supported by Reuer et al. (2002) who show that roughly
44% of their sample alliances faced a governance change as the alliance
evolved.
In a related study, Lerner et al. (2003) analyze the initial alloca-
tion of control rights in biotechnology alliances. Their findings show a
bargaining imbalance in the way that alliance agreements signed during
periods of limited external equity financing are more likely to assign
most of the control to the larger corporate partner. As a result these
agreements are significantly less successful than other alliances and, in
addition to that, they are also disproportionately likely to be renegoti-

ated if financial market conditions subsequently improve. In subsequent
work, Lerner and Malmendier (2010) find that when research activi-
ties are not contractible, an option contract is optimal. Moreover, the
threat of termination deters researchers from cross-subsidization, and
the cost of exercising the termination option deters the financing firm
from opportunistic termination.
It is obvious that the question of appropriability, i.e., environmental
factors like the nature of technology, and the efficacy of legal mecha-
nisms of protection, is a core issue within the field of biotechnology
strategy due to their reliance on pharmaceutical company partner-
ships (Teece, 1986). For example, a young biotechnology firm which
is unknown to the market may be forced to pay a high premium for a
partnership with a prestigious alliance partner and transfer a dispro-
portionate share of control rights of intellectual property or revenue
streams to the partner (Lerner and Merges, 1998). Gans and Stern
(2003) develop a framework in order to identify the central drivers
of start-up commercialization strategy and the implications of these
drivers for industrial dynamics by linking strategy to the commercial-
ization environment. For example, when intellectual property protec-
tion is strong and important specialized complementary assets are held
by incumbent firms, start-up firms generate more innovative rents if
they pursue cooperative strategies with incumbent firms rather than
competing directly. However, when and under what circumstances the
benefits of endorsement by prestigious alliance partners may outweigh
related costs still remains an interesting avenue for further research.
While the above studies demonstrate the important role of
appropriate governance mechanisms and their adjustment over time for
alliance success, Hoang and Rothaermel (2005) focus more on a biotech-
nology firm’s previous alliance experience as a central success factor.
Specifically, these authors argue that both general, diverse-partner
experience, and partner-specific experience of biotechnology and phar-
maceutical firms, contribute to alliance performance, but at a declining
rate. They build their argumentation on an organizational learning lens
and outline a theory of alliance experience accumulation obtained from
allying across a diverse set of partners, and from repeatedly allying with
the same partner over time. Their results show that general alliance
experience of the biotechnology partners, but not of the pharmaceuti-
cal firms, positively affected joint project performance, and that this
relationship shows diminishing marginal returns. Partner-specific expe-
rience, however, had a negative effect on joint project performance.
Moreover, the authors conclude that a firm-level alliance management
capability exists. Building on these conclusions, Rothaermel and Deeds
(2006) develop a model that links differential demands of alliance type
and the benefits of alliance experience to an observable outcome from
a firm’s alliance management capability. Their research results suggest
that alliance type and alliance experience moderate the relationship
between a high-technology venture’s R&D alliances and its new prod-
uct development. Consequently, Rothaermel and Deeds (2006) propose
the existence of an alliance management capability and its heteroge-
neous distribution across firms.
In order to further refine the construct of alliance management capa-
bility and the role of experience in building such capability, in a recent
study Hoang and Rothaermel (2010) argue that alliance exploitation
experience in the biotechnology industry has positive effects on R&D
project performance, while alliance exploration experience has negative
effects. Moreover, they show that an internal exploration competence
allows firms to leverage their external exploitation experience more
fully. However, Hoang and Rothaermel (2010) find that when firms com-
bine internal exploitation experience with external exploration experi-
ence, the negative effects on R&D project performance become more
pronounced. Similarly, McNamara and Baden-Fuller (2007) explore a
financial returns dimension of the exploration–exploitation question.
Their research findings suggest that investors respond positively at
every stage, but there are differences between small and large biotech-
nology firms. They find that for small biotech firms exploration is
favored, provided it is focused, whereas for large firms, there is value
in both exploration and exploitation.
In addition to general alliance management capability, during the
alliance management process biotechnology firms build up relational
capability in order to transfer and internalize knowledge and to
effectively manage alliance relationships (Kale et al., 2002). As firms
gain experience with alliances and develop these relational capabilities,

they are also able to improve their alliance performance. For example,
Zollo et al. (2002) demonstrate that familiarity via prior partnership
experience has a positive impact on alliance performance between
biotechnology and pharmaceutical firms. These results are in line
with findings reported by Katila and Mang (2003) and Hoang and
Rothaermel (2010). In another study, Higgins and Gulati (2003)
show that firms with a larger alliance portfolio can secure a more
prestigious underwriter as these ties reduce uncertainty with respect to
their commercial potential and provide enhanced legitimacy. Finally,
Pangarkar (2009) argues that firms which have experienced prior
terminations are less likely to have their future alliance terminated
because prior terminations will enable firms to design better alliances
and adopt more appropriate alliance management strategies to avoid
future terminations. Moreover, his research findings suggest that
termination experience mediates the relationship between alliance
formation experience and the likelihood of termination.
Despite all these positive effects of strategic alliances, it is necessary
to mention that under certain conditions alliances may generate neu-
tral or even negative consequences for participating firms. For example,
Deeds and Rothaermel (2003) analyze the relationship between the
age of an alliance and the performance of the alliance in biotechnol-
ogy R&D alliances. They find that the relationship between age and
alliance performance is U-shaped curvilinear rather than linear, with
the minimum point of alliance performance occurring after approxi-
mately four and one-half years. Consequently, Deeds and Rothaermel
(2003) conclude that strategic alliances appear to face a liability of
adolescence rather than a liability of newness, and that important
alliances exhibit generally shorter honeymoon periods. Further, Baum
and Silverman (2004) found that some alliances may lead biotechnology
firms to over-allocate resources to certain activities at the expense of
other crucial ones, so that a biotechnology firm’s innovation rate may
be slowed down. In another study, Baum et al. (2000) demonstrate
that start-up biotechnology firm’s alliances with government laborato-
ries may slow its revenue growth. Both studies provide evidence that a
biotechnology firm’s participation in horizontal alliances, which often
implies partnering with competing firms, can be linked to decreased

revenues and reduced innovation levels. As another downside of strate-
gic alliances, Maurer and Ebers (2006) suggest that repeat partnering
with the same set of partners may lead to relational lock-in and dys-
functional ties.
4.3 Mergers and Acquisitions of Biotechnology Firms

Mergers and acquisitions (M&As) are a popular strategy for firms
because they offer the immediate access to technologies, products, dis-
tribution channels, and desirable market positions (Schweizer, 2012).
The aim to obtain valuable resources, including know-how, technolo-
gies, and capabilities possessed by target firms has always been a driver
of M&A activities (Ahuja and Katila, 2001; Graebner et al., 2010;
Sowlay and Lloyd, 2010). Bower (2001) has pointed out that these
motives have increased in importance in the most recent wave of acqui-
sition activity given that in industries characterized by rapid innova-
tion, technological complexity, and highly specialized skills and know-
how — like biotechnology — the pace and magnitude of technologi-
cal change may not allow firms to internally develop all the necessary
technologies and capabilities to remain competitive. More specifically,
M&As in the biotechnology industry are a strategy for overcoming a
lack of knowledge, reducing R&D costs, and increasing the number of
potential products in a pipeline (Ahuja and Katila, 2001; Ranft and
Lord, 2002; Sowlay and Lloyd, 2010). Thus, several contributions have
emphasized the important role that M&As can play as an external
source of innovation (Arora and Gambardella, 1990; Graebner, 2004;
Hitt et al., 1996).
Nonetheless, the management and the integration of such M&A
transactions can yield significant problems. Acquisitions can lead to
high levels of employee stress (Cartwright and Cooper, 1992, 1993),
increased turnover (Hambrick and Cannella, 1993; Ranft and Lord,
2000), and a drop in the productivity of acquired R&D personnel
(Paruchuri et al., 2006). As a consequence, the successful realization
of innovations following an acquisition is endangered. Overall, M&A
research has shown that there is considerable evidence that many
M&As have failed to achieve their objectives due to difficulties in the

post-acquisition integration process (Datta et al., 1992; Marks and
Mirvis, 2001). Despite the fact that at least 50–100 M&A transac-
tions are announced on average in the biotech industry every year
(Biocentury, 2003) with 45 biotechnology acquisitions at a deal value of
US$20 billion in 2010 (Ernst and Young, 2011), there is still very little
scientific research devoted to M&A activities of biotechnology firms
(Patzelt et al., 2007; Schweizer, 2012).
4.3.1 Strategic Reasons for Biotechnology M&A Activities

The research of Schweizer (2005a,b, 2009, 2012) has shown that M&A
activities in the biotechnology industry are driven by the motive to
internationalize research and development, to take part in the indus-
try’s development process, and to realize the biotech firm’s growth
potential. Nonetheless, a more detailed differentiation is required.
The first two main motives for biotech firms to enter into M&A
transactions with pharmaceutical companies are, (1) securing the
future survival of the company by getting access to financial resources
and, (2) support of the entrepreneurial firm’s growth strategy in order
to expand their R&D activities. While these two motives go hand in
hand and are short time oriented, a third motive of bringing their
product to market is more long term oriented given the long devel-
opment cycle of biotherapeutic drugs. Danzon et al. (2007) examine
the determinants and effects of M&A activity in the pharmaceutical
and biotechnology industry. Their research results show that for large
firms mergers are a response to expected excess capacity due to patent
expirations and gaps in a firm’s product pipeline. For small firms,
it appears that mergers are primarily an exit strategy in response
to financial trouble. Further, Carayannopoulos and Auster (2010)
find that external knowledge sourcing through acquisition is more
likely when the biotechnology knowledge domain is more complex and
valuable. Acquisition is also preferred when the acquirer has greater
acquisition experience, and when the target firm has accumulated a
moderate level of alliance experience.
When analyzing and synthesizing further articles and reports on

biotech M&A activities (e.g., Arnold et al., 1999; Biocentury, 2003;
Patzelt et al., 2007; Sowlay and Lloyd, 2010; Van Brunt, 2005; Webber,
1999), two main motives for M&A activities between two biotechnology
firms emerge. (1) One can identify the financial necessities from the
point of view of the biotechnology companies. Given the ups and downs
at the capital markets, the financing environment for biotechnology
offerings is highly dynamic. Moreover, most of the companies are only in
the early stage development of products and face significant challenges
to maintain sufficient liquidity. As a result, one biotech company may
acquire another merely for its money on the bank account in order to
ensure future survival. (2) Biotechnology acquisitions are driven by the
desire to get access to promising product candidates (i.e., fill up the
pipeline) and enabling technologies or intellectual property in order to
achieve a critical project mass and improve their competitive position.
Focusing on the perspective of the acquirer, Bernstein (2003) has
identified the following five key questions concerning the decision
whether to carry out a biotechnology acquisition or not:
(1) Does the acquisition strengthen the balance sheet?

(2) Does the acquisition strengthen the intellectual property?
(3) Does the acquisition fill the pipeline?
(4) Does the acquisition provide any technological synergies?
(5) Does the acquisition add key people?
These key questions correspond to the main benefits Patzelt et al.

(2007) identify in their empirical study on the acquisition of German
biotechnology companies. The authors show that M&As provide
an important opportunity for biotech startups to acquire financial
resources as they give a clear signal to investors that the companies
are willing to reduce costs and to restructure their project portfolio.
In addition, a merger with a foreign firm may be an opportunity
for biotechnology startups to escape the hostile financing environ-
ment of their home country. Besides, Patzelt et al. (2007) demonstrate
that M&As provide a possibility to expand the pipeline of late stage
products and that the integration of new technologies can save time and
costs when compared to building up the resources internally. Lastly,

they present that managerial benefits can be achieved through M&As
if one company is lacking management experience which the other
company offers. Haeussler (2007) shows that firms with inter-firm col-
laborations are generally more likely to engage in M&A activities than
firms that lack such connections. Surprisingly, she finds no support
for the argument that financial distress is a factor that influences the
propensity to engage in M&As. Consequently, she concludes that M&As
in the biotechnology industry are rather proactively carried out than
reactively enforced.
Since many early stage biotechnology firms do not yet generate rev-
enues, they are crucially dependent on acquiring capital from venture
capital investors and securing the support of these investors over time.
Powerful investors, however, can also influence the M&A activities of
the firms. For example, zu Knyphausen-Aufseß et al. (2006) analyze the
M&A and diversification strategies of venture capital firms and their
portfolio companies in the biotechnology industry and argue that in
an economic downturn there should be a rationale for venture capital
firms to merge some of their portfolio companies to save resources and
create firms with a stronger project portfolio. The authors label this
portfolio strategy of investors as ‘flagship strategy’.
In an attempt to classify different types of M&A activities in the
biotechnology industry, Schweizer (2005b, 2012) has taken an industry
perspective and identified two different layers (or types) of M&A activ-
ities. The first layer deals with M&A activities between biotechnology
companies, whereas the second layer concerns M&A activities between
pharmaceutical and biotechnology companies as pharmaceutical com-
panies are now seeing the possibility to acquire biotechnology know-how
and products cheaper than they can build internally. Schweizer (2005b)
points out that biotechnology acquisitions carried out by pharmaceuti-
cal companies are driven by multiple motives: the desire to fill up the
R&D pipeline, gaining access to potential blockbusters, and acquir-
ing valuable biotech know-how and technologies in order to enhance
the acquirer’s growth strategy. In a next step, these motives turned
out to be divided between short- and long-term motives. Although
the long-term rationale behind the acquisitions was largely identical
(support of the pharmaceutical firms’ growth strategy by acquiring

valuable biotech know-how and technologies), some of the short-term
drivers for the acquisitions differed substantially (e.g., improvement of
market position; getting a blockbuster and filling up R&D pipelines;
acquire patent rights; increase efficiency).
To sum up, the specific type of M&A depends on the strategic
reason to enter into the M&A transaction. For example, M&A activi-
ties between biotech companies, or the acquisition by a pharmaceutical
company, may provide a viable solution to get access to new capital.
Nonetheless, access to products is considered as the primary motive
for biotechnology M&A deals as every company needs to fill up its
pipeline. However, it is very important to consider the statement of
Bower (2001, pp. 99–100) who pointed out that “many of the pharma-
ceuticals’ R&D acquisitions have yet to pay off ” because biotech prod-
ucts and technologies are organic and far more difficult to integrate
than computer or chip components. Intangible assets like know-how
and intellectual property do not automatically translate into tangible
revenue. In line with this argument, Bradfield and El-Sayed (2009)
point out that M&As of competing pharmaceutical and biotechnology
firms, rather than resolving the problems of the acquiring firm, cre-
ate new ones. Similarly, Danzon et al. (2007) come to the conclusion
that mergers may be a response to trouble for firms operating in the
biotechnology and pharmaceutical industry, but they are not always
a solution. Thus, it appears that there are quite some challenges to a
successful post-acquisition integration of biotechnology M&A activities
(Graebner et al., 2010).
4.3.2 Managing the Post-acquisition Integration of

Biotechnology M&As
Despite the opportunities M&A activities provide for biotechnology
firms, M&As often present a significant challenge for both parties
involved and despite their strategic potential, many of them fail to
create value (Graebner et al., 2010; King et al., 2008; Schweizer,
2012). Thus, we will briefly discuss different aspects for a successful
post-acquisition integration of biotechnology M&A deals along the
dimensions of culture, human resource management, and organizational

integration including the experience effect and knowledge transfer.
Culture. While on the one hand Hitt and Pisano (2004, p. 50) empha-
size that “post-merger integration is likely to be more difficult to achieve
between firms with home bases in different countries”, Barkema et al.
(1996), on the other hand, call for a double-layered acculturation pro-
cess comprising national and organizational cultural differences. With
respect to biotechnology M&A activities, Schweizer (2005b, 2009) finds
that differences in terms of national cultures do not appear to play
a major role for a successful integration of acquired biotechnology
firms. Either national cultural differences did not really turn out to
be a problem, or they could be solved quite quickly and easily. People
working in the pharmaceutical and biotechnology R&D field have very
often undergone the same training and are used to work in interna-
tional teams reducing the cultural gap in terms of communication. This
explains why the pharmaceutical and biotech industry are considered as
being global high-tech industries, and that biotechnology firms are born
globals (Levitt, 1983; Oviatt and McDougall, 1997; Van Brunt, 2000).
In contrast, Schweizer (2009) shows that organizational cultural
differences between small, entrepreneurial-driven and high risk-taking
biotechnology firms and large, rather slow pharmaceutical firms con-
stitute a source of problems when pursuing an M&A strategy. This is
in line with the findings of Al-Laham et al. (2010) who show that a
biotech-specific dominant logic exists when acquiring another biotech
company. That is, when remaining in the biotechnology industry, the
acquirers can rely on their experience with the general nature of
biotechnology firms that have similar management styles (Larsson and
Finkelstein, 1999) and that follow the same biotechnology specific dom-
inant logic (Prahalad and Bettis, 1986). Consequently, the acquirers are
able to strengthen their core competencies by rapidly integrating the
target due to reduced organizational, human resources and cultural
related problems (Hoskisson et al., 1994). By that, the post-acquisition
integration process can speed up.
Human resource management. Increased turnover among key R&D
personnel (Ranft and Lord, 2000) following an acquisition results in
the loss of their knowledge and expertise. Ranft and Lord (2000)
argue that the retention of valuable human capital is critical for the
post-merger integration and, thus, for merger success as value creation
takes place after the merger (Haspeslagh and Jemison, 1991). Inter-
estingly, Schweizer (2005b, 2009) found that most top managers leave
the biotech firms after the acquisition, probably because these firms
lost their entrepreneurial and risk-taking spirit when pursuing their
M&A strategy. Paruchuri et al. (2006) have found that the productiv-
ity of corporate scientists of acquired companies in the pharmaceutical
industry is generally impaired by integration, but that some scientists
experience more disruption than others. In particular, acquisition inte-
gration will be most disruptive, leading to the most severe productivity
drops for those inventors who have lost social status and centrality in
the combined entity.
Organizational integration. Frequent acquirers are more likely to make

subsequent acquisitions because they have the opportunity to learn
from past acquisitions (Haleblian et al., 2006). Consistent with this
argument, Al-Laham et al. (2010) in their study on M&A activities in
the biotechnology industry find that prior acquisition experience has a
positive effect on the post-acquisition patenting rate because these firms
have already built up integrative and combinatory capabilities regard-
ing the integration of acquired companies. Moreover, the authors show
that direct pre-acquisition alliances along with biotechnology sector
familiarity are important because they facilitate and speed up the
post-acquisition organizational integration. Prior alliances allow the
acquirer to gain inside information on the quality of the target and/or
potential problems related to their technologies. Al-Laham et al. (2010)
argue that in particular the integration of knowledge during the post-
acquisition integration phase is a complex task and that the incor-
poration of specific biotechnology knowledge is facilitated when prior
acquisition experience, direct alliance experience, and sector familiarity
prevail.
From an organizational point of view, the acquiring firms need to
integrate target firms in order to further develop and commercialize
their technologies, while at the same time preserving the organizational
autonomy of the acquired firms in order to avoid endangering their

innovative research capabilities (Puranam et al., 2006; Ranft and Lord,
2002; Schweizer, 2005b). The analysis of Schweizer (2005b) reveals that
different integration strategies with different degrees of autonomy have
to be used as the realization of some short-term M&A motives called
for an immediate absorption of the acquired biotechnology firm. In
constrast, the long-term M&A goals can only be realized with a preser-
vation approach. Thus, Schweizer (2005b) develops a post-acquisition
integration framework that calls for a hybrid integration approach
with simultaneous short- and long-term orientations and segmenta-
tion across different functions and value chain components concerning
R&D and non-R&D-related portions. For successful post-acquisition
integration of acquired biotech companies it is necessary to protect the
acquired firms’ competencies by applying a slow preservation approach
concerning R&D-related areas. With regard to clinical trials, regulatory
affairs, and sales and marketing, a rapid integration is possible as they
belong to the core competencies of either the pharmaceutical company
or of a large biotechnology firm. Furthermore, Schweizer (2005b) sug-
gests that the supporting functions (finance, HR, IT) are carried out
by the acquiring pharmaceutical companies because they usually have
more elaborate systems.
5
Individual-Level Research on
Biotechnology research at the level of the individual is still sparse.

This fact is surprising given the general focus on the individual in
entrepreneurship research (Rauch and Frese, 2007) and because prac-
titioners emphasize that biotechnology entrepreneurs are somewhat
different from the general population of entrepreneurs because they
need to possess both industry and managerial knowledge on the one
hand, but also scientific knowledge about new biotechnological develop-
ment on the other hand (Alper, 2002; Rienhoff, 1998). The few existing
individual-level studies have either focused on biotechnology scientists,
individual biotechnology managers, or the biotechnology venture’s top
management team.1
5.1 Scientists in the Biotechnology Industry

Since the development of a new technology triggers the formation of
most new biotechnology ventures, studies have investigated how new
1 We would like to acknowledge that some of the literature discussed in earlier sections
also covers individuals, for example work on networks (Fleming et al., 2007; Owen-Smith
and Powell, 2004). This work, however, is more linked to outcomes of the other levels
of analysis (e.g., cluster performance) and is therefore included in the respective sections
above.
107
108 Individual-Level Research on Biotechnology Entrepreneurship
biotechnological knowledge is created, and how that knowledge can

“spill over” to new firms. Within this stream of research, special atten-
tion has been given to the scientists at public research institutes and
universities who develop new knowledge and then contribute to trans-
ferring it into new ventures. In a seminal article, Zucker et al. (1998)
studied the co-location of highly qualified (“star”) scientists and the
emergence of new biotechnology firms in the US. The study shows that
more new biotechnology firms are founded in regions where more star
scientists (as judged by their citation rate) work at universities and
research institutes. Similar results regarding the importance of star
scientist-firm co-location for innovation output were obtained for Japan
(Zucker and Darby, 2001).
Further, work by Audretsch and Stephan (1996) investigated the
nature of the links between university scientists and the biotechnology
firms with which they are affiliated. While this study found that
scientists tend to generally co-locate with their affiliated firms, this
effect was stronger for older scientists, those who were also founders
of the firm, and those who won a Nobel prize. Thus, it appears that
special proximity matters for scientists’ involvement in biotechnology
firms and entrepreneurship, but contingent on the scientists’ charac-
teristics. In another study with German and UK scientists, Haeussler
and Colyvas (2011) found that professional security and productivity
are predictors of scientists’ motivation to engage in entrepreneurship.
There is also evidence that the value orientation of biotechnology sci-
entists on what they perceive to be a “market” and “expert science”
influences their engagement in commercial activities and whether they
conduct more basic or applied research (Glenna et al., 2011).
Recent studies have also focused on the role of R&D scientists
within private biotechnology firms. For example, work has confirmed
the importance of star scientists in terms of the firms’ technologi-
cal development (Tzabbar, 2009), innovative performance (Rothaer-
mel and Hess, 2007), and valuation at the IPO (Higgins et al., 2011).
Indeed, it appears that having a Nobel laureate affiliated with the firm
increases its IPO value by an average of 24 million $US (Higgins et al.,
2011). Research has also shown that firm scientists play a key role in
attracting alliance partners (Luo et al., 2009).
5.2 Strategic Decision Making and Top Management Teams 109
To study scientists’ motivation to share knowledge with others and

thus facilitate knowledge spill-overs within the scientific community,
Haeussler (2011b) surveyed 1694 biotechnology scientists from both
academia and industry. The study found that the higher the compet-
itive value of information, the less likely scientists share it. Further,
information sharing is influenced by scientists’ social capital prop-
erties, but differently for university and academic scientists. From
the perspective of the knowledge seeker, a survey of 507 biomedical
researchers revealed that scientific competition, costs of providing the
knowledge, and knowledge suppliers’ past engagement in commercial
activities counteract information sharing (Walsh et al., 2007). Further,
although the overall connectedness between academic scientists and
firm inventors within the scientific community is substantial, the trans-
fer of knowledge appears to be dependent on the existence of “gate-
keepers” — individuals who occupy prominent positions in scientific
and technological networks (Breschi and Catalini, 2010).
5.2 Strategic Decision Making and

Top Management Teams
Although founding and managing a biotechnology firm is among the
most complex entrepreneurial endeavors due to the competitiveness
and dynamism of the environment and the technological complexity,
there is little research how strategic decisions are made within biotech-
nology firms. One exception is the study by Patzelt et al. (2008a), who
investigate how a biotechnology venture’s capabilities and environmen-
tal scarcity impact managers’ decision to seek a new alliance. Drawing
on a conjoint study with 51 managers, the authors find that manage-
rial discretion in the form of financial slack moderates how internal
capabilities and environmental munificence motivate entrepreneurs to
look out for new alliance partners, thus highlighting the complexity
of biotechnology managers’ decision policies. Another example is a
policy-capturing study by Kachra and White (2008) who study efforts
of 79 biotechnology R&D scientists to absorb knowledge from other
sources of transfer knowledge to recipients. The study finds that com-
petitiveness, the strength of the social relationship, and whether the
knowledge is transferred within or across organizational boundaries

conjointly explain, partly, scientists’ efforts.
Further, studies have focused on the CEO of biotechnology firms
because CEOs are highly influential on the development of young
and small firms (Andrews and Welbourne, 2000; Boone et al., 1996;
Eisenhardt and Bourgeois, 1988; Merz et al., 1994). Deeds et al.
(1999) investigate the role of biotechnology managers in triggering
new product development. Using a sample of 94 US biotechnology
firms, the authors find support for the hypothesis that the CEO’s
R&D experience is positively related to biotechnology ventures’ rate
of new product development. In another study on 125 US biotechnol-
ogy firms, Finkle (1998) finds a positive relationship between CEOs’
previous career as professors and the IPO valuation of biotechnology
firms, and a positive relationship between CEOs’ background in finance
and IPO valuation. Finally, a recent study by Patzelt (2010) demon-
strates that the CEO’s qualifications in management, as well as their
firm-specific founder-based, international, and industry-specific experi-
ences can trigger venture capitalists’ investments in young biotechnol-
ogy firms. However, the effects of management education and industry
experience are moderated by the size of the biotechnology firm’s man-
agement team.
Due to the complexity of founding biotechnology firms and the
multitude of competencies required, most ventures are founded by a
team rather than by individual entrepreneurs. Therefore, a few stud-
ies have investigated the role of the composition of the management
team in biotechnology firms’ development. For example, Deeds et al.
(1999) propose that ventures run by teams with higher levels of quali-
fication (as judged by team members’ PhD degrees) would have higher
R&D productivity. Surprisingly, however, the authors find a negative
relationship between the share of PhDs on the team and new product
development. The authors explain this finding by a potential misal-
location of human capital within the firm. That is, putting too many
scientists with PhDs on the management board may distract them from
their research activities (Deeds et al., 1999). To study the relationship
among team composition, business model, and biotechnology firm per-
formance, Patzelt et al. (2008b) use a contingency perspective and data
5.2 Strategic Decision Making and Top Management Teams 111
on 99 German biotechnology firms. The study shows that founder-based

firm-specific experience and pharmaceutical industry experience within
the management team can contribute to firm performance; however,
these effects are contingent on the firm’s business model. While pharma-
ceutical industry experience is beneficial for both product-oriented and
service-oriented firms, the effect is stronger for the former. Interestingly,
founder-based firm-specific experience is beneficial for service firms, but
negatively related to the performance of product-oriented firms. These
findings highlight the heterogeneity of biotechnology firms with respect
to the competencies required in the top management team. Finally,
work by Kim and Higgins (2007) investigates the role of biotechnology
managers in establishing strategic alliances. Based on an event history
analysis with data on career histories of 3200 biotechnology managers,
this study finds that alliance formation is related to status homophily
and role-based homophily between ventures and incumbent firms.
Interestingly, a recent study illustrates the downside of having expe-
rience in the top management team. Urbig et al. (forthcoming) focus
on the role of management teams’ industry experience in case of new
product development failure. The authors argue that in case of failure,
investors will be particularly disappointed when the firms’ management
team is highly experienced, leading to a more substantial drop in the
firm’s value. Using an event study and data on 148 biopharmaceutical
product development failures, the authors find support for this hypoth-
esis. However, the effect is only strong for late stage failures. For early
stage product failures, it appears that investors view industry experi-
ence more as an indication of managers’ competence to recover from
the failure and start new development projects.
Finally, an article by Higgins and Gulati (2003) investigates how the
experience of top management team members facilitates the attraction
of the endorsement of a prestigious investment bank for an IPO. Using
career histories of more than 3200 executives of biotechnology firms that
went public between 1979 and 1996, the authors find that top manager
affiliations with prominent downstream organizations (pharmaceutical
firms) and horizontal organizations (other biotechnology firms) facil-
itate the attraction of a prestigious investment bank as an under-
writer. Moreover, a more diverse portfolio of affiliations to upstream
(university), horizontal, and downstream partners is linked to more

prestige of the lead underwriter. This effect is stronger, the earlier the
firm’s technology development stage.
Taken together, research at the individual and team level has
demonstrated that highly competent (star) scientists are often the
trigger of commercializing a new biotechnological technique by found-
ing a new venture. Further, it appears that the CEO is a central person
for the success of biotechnology firms, and that the composition and
competencies of the firm’s top management team play an important role
in explaining biotechnology ventures’ development trajectories and,
finally, performance.
6
Future Research and Conclusion
The purpose of this monograph was to review important research

streams on entrepreneurship in the context of the biotechnology
industry. We summarized studies at the regional level, firm level, and
individual level of analysis. Although a lot of work has been done,
there are ample research opportunities for scholars to advance our
understanding of biotechnology entrepreneurship at multiple levels of
analysis. While some open research questions have already been high-
lighted earlier in this manuscript, many remain unanswered. We will
provide some examples below.
6.1 Future Research at the Regional Level

At the regional level of analysis, there appear to be important questions
unanswered how external players such as the cluster management and
public institutions can facilitate the knowledge transfer from universi-
ties to firms. Most clusters and regional network associations are run
by some cluster management. What can these people do to motivate
scientists to contribute their knowledge to new biotechnology ventures?
Perhaps also the universities and research institutions within the cluster
113
114 Future Research and Conclusion
can facilitate knowledge transfer if they appoint professors with previ-

ous industry experience. Further, to what extent does it make sense to
focus the actors within a regional network on a more specific techno-
logical trajectory? Do clusters that are exclusively dedicated to, e.g.,
green biotechnology have more efficient knowledge transfer and better
performance than clusters that are more diverse in terms of the tech-
nological basis of their organizations? And how can (and should) the
cluster management interfere with, or stimulate, the pursuit of certain
technological paths?
Further, relatively few studies have taken a dynamic perspective
on the development of biotechnology networks and clusters (Casper,
2007; Colyvas, 2007). For example, while many studies have emphasized
the role of universities and large firms in biotechnology networks, only
recently have authors studied how the importance of such links changes
over the life cycle of the biotechnology firm (Maurer and Ebers, 2006;
McCann and Folta, 2011). This suggests that as the firms in a particular
biotechnology cluster mature, there may also be benefits in adjusting
the configuration of network actors within the cluster environment.
For example, how does the emphasis on ties between universities and
young ventures on the one hand, and between large firms and young
ventures on the other hand, change with the maturity of the cluster and
its firms? Should the cluster management provide incentives to large
corporations to start subsidiaries within or near the cluster when the
firms in the cluster mature? If so, do the competencies and network ties
of the cluster management itself change over the cluster’s life cycle?
Finally, there appears to be an insufficient understanding of the
downside of networking and regional clustering. Although some authors
have emphasized the monitoring and coordination costs of network
activities (Gulati, 1998; Lechner et al., 2006) the overall belief is that
networks and clusters are “a good thing” for biotechnology actors.
However, in a recent study Stuart and Sorenson (2003b) found that
biotechnology firms face more problems for going public and raising
funds when they are in spatial proximity to other biotechnology firms.
Indeed, many biotechnology clusters are believed to be not successful
(Casper, 2007). What is the optimal size of a cluster and density of
biotechnology firms within the cluster? Perhaps these optimal values
6.2 Future Research at the Firm Level 115
change with the age and size of the firms such that when firms are at
different stages of their life cycle a higher density is optimal because
they do not compete for the same sources of finance (the younger ones
might try to attract venture capital while older firms aim to go for an
IPO). It appears to be an important research avenue to investigate how
the composition of a cluster should look like such that the benefits for
the biotechnology firms in the cluster outweigh the problems associated
with co-location.
6.2 Future Research at the Firm Level

Although most of the research on biotechnology entrepreneurship has
been carried out at the firm level of analysis, there are still interesting
and important research questions that provide promising avenues for
future research. First, with regard to strategies and business models,
scholars could analyze the relationship between the overall corporate
strategy of biotechnology firms and the different business models on the
divisional/business unit level, and how their integration and interaction
works. Examples of detailed research questions include: which factors
influence the choice of a business model on a corporate and a business
unit level? Which business model is the most successful one — why
and under what conditions? Further, given that business models have a
dynamic perspective, it is necessary to analyze the dynamics of business
models: How and why do business models change over time? Is there a
specific life cycle of business models in the biotechnology industry?
Second, despite the fact that management researchers have done
substantial research on strategic alliance in the biotechnology sector,
there still remain open questions — especially since the pattern of inter-
firm collaboration in biotechnology is more intensive than in most other
industries. For example, it would be interesting to analyze more closely
the functioning and evolution of a specific biotechnology alliance man-
agement capability, and how this development impacts the performance
of the respective biotechnology firms. Moreover, managing the tension
between collaboration and competition of biotechnology firms provides
opportunities for further research: How do the dynamics of power and
dependence in strategic alliances evolve? How does this development
impact value creation and value appropriation? Do these dynamics

affect the governing mechanisms of the alliances and, if so, how?
Third, M&As have become a wide-spread strategy in the biotech-
nology sector, but are an under-researched phenomenon. With refer-
ence to Schweizer (2012), we suggest the following open research ques-
tions: Under what conditions are biotechnology entrepreneurs willing
to sell their venture? How do biotechnology firms compare M&As with
other strategic options like strategic alliances or licensing agreements
and what criteria do they use to decide between these alternatives?
What risks does the M&A due diligence process involve? How can the
acquirer make sure that top researchers remain with the newly com-
bined entity after the deal is closed? How do biotechnology firms cal-
culate the expected synergies of the deal? What measures can be used
to determine the success of biotechnology M&A activities?
Finally, an area that is becoming increasingly important to the
biotechnology industry and for which not much research exists is the
increased globalization of the biotechnology industry and biotechnol-
ogy firms. In line with Levitt’s (1983) globalization thesis, Van Brunt
(2000) argues that the pharmaceutical and biotechnology industries are
considered as being global high-tech industries, and that biotechnology
firms are born globals (Oviatt and McDougall, 1994). Thus, future
research might analyze the orchestration of value chains across mul-
tiple countries, the increased ability of small biotech firms to develop
global partnerships, and the emergence of entrepreneurial biotechnol-
ogy companies in BRIC economies.
6.3 Future Research at the Individual Level

At the individual level of analysis, research is generally sparse and
scholars can make important contributions by focusing on “the people
side” of biotechnology entrepreneurship. These “people” could be
entrepreneurs, the biotechnology firm’s management team, or employ-
ees of biotechnology firms.
For example, there is still insufficient understanding of what makes
a “good biotechnology entrepreneur”, with “good” referring to both,
the motivation of a scientist to start a venture, and the success of the
6.3 Future Research at the Individual Level 117
biotechnology entrepreneur in managing the venture. Transiting from

science to business means a change in biotechnology entrepreneurs’
occupational identities, tasks, and goals. How can scientists manage
such a transition process successfully? For those who are not successful,
how can they most effectively and efficiently organize their way back to
academia when the venture grows? What is the optimal allocation of
time between science and business for biotechnology entrepreneurs, and
how does this allocation change when the firm matures? How do specific
characteristics of potential entrepreneurs influence whether they can or
should stay in business, and for how long after the firm is founded?
What drives the decision of biotechnology entrepreneurs to stay with
or leave their venture?
As for individual biotechnology entrepreneurs, there are ample
research opportunities for studying biotechnology venture teams. While
there is some evidence that the education and experiences of team
members are important for biotechnology ventures’ performance, these
studies have been static and cross-sectional. However, the composi-
tion of entrepreneurial teams changes over the venture’s life cycle
(Ucbasaran et al., 2003), and this change appears to be particularly
severe in biotechnology venture teams during the transition from a
science-oriented venture toward a revenue-oriented firm because such
a transition requires changes in values, identities, and competencies of
the team members. For example, longitudinal and qualitative studies
could follow the evolution of teams in successful and less successful
biotechnology firms and identify factors that facilitate or hinder the
transition of values and identities and the development of the compe-
tencies needed. When is the best point in time for the scientific founder
to hand their leading position over to a professional CEO? How should
the founder be further involved in the venture to secure access to her
or his scientific knowledge? And how are potential intra- and interper-
sonal conflicts related to changes in identities and values during the
evolution of the team best resolved? Answering these questions can
make important contributions to both the literature on biotechnology
entrepreneurship and the literature on entrepreneurial teams in general.
Further, a biotechnology venture’s human capital is not only
comprised of the founder and the management team, but to a
large extent also by the scientists employed. These scientists move

the technology further along its development trajectory. However,
employees have generally been neglected in the study of entrepreneurial
firms, suggesting potential for contributions to the broader litera-
ture on entrepreneurship. For example, a recent study showed that
entrepreneurs’ displays of passion for inventing new technologies can
trigger employee commitment (Breugst et al., 2012). Does this mean
that biotechnology firms benefit from having a passionate scientist on
the management team in terms of motivating their employees? Further,
a recent study has found that hiring of biotechnology scientific per-
sonnel affects the technological breadth of the venture, contingent
on the presence of star scientists in the firm (Tzabbar, 2009). What
can entrepreneurial ventures do to attract and motivate scientists to
contribute to the development of the new venture given their stock
of human resources and research scope? This question appears par-
ticularly relevant because the primary occupational goal of many
scientists — publishing in high ranking journals — might conflict with
the management’s goal of bringing the technology to market. Should
the ventures allow their scientists to publish in order to keep them
motivated or should they prohibit publishing to focus the scientists on
technology development and keep scientific advancements secret? What
other financial and non-financial incentives can biotechnology managers
use to motivate employed scientists to comply with the technological
goals of the venture and keep them creative [e.g., profit sharing or flex-
ible pay (Monsen et al., 2010)]?
6.4 Future Research Covering Multiple Levels of Analysis

Finally, one issue that has basically remained untouched in the field
of biotechnology entrepreneurship is studies covering multiple levels
of analysis and investigating cross-level effects. Indeed, scholars have
claimed that there is a general lack of cross-level studies both in the
field of entrepreneurship (Shepherd, 2011) and organization science
(Rothaermel and Hess, 2007). Cross-level studies could cover interac-
tions between regional and firm levels, firm and individual levels, and
regional and individual levels.
6.4 Future Research Covering Multiple Levels of Analysis 119
For example, studies have investigated whether being located in a

cluster is beneficial or not for biotechnology firms (e.g., Stuart and
Sorenson, 2003a,b), but they have largely neglected that there is het-
erogeneity between both clusters and firms within one cluster. For what
firms is being located in a cluster more beneficial? Perhaps firms pur-
suing a business model based on new product development profit more
from proximity to universities and research institutes facilitating the
access to new knowledge, than firms with a service-based business
model. Further, clusters differ in their size and composition of orga-
nizations. What organizations (e.g., universities, incubators) are most
crucial for what types of firms within a cluster? Biotechnology clusters
also differ in their technological scope (Aharonson et al., 2008). Are
firms in clusters that are more specific in their scientific basis (e.g., a
cluster focusing on medical technology or “green” biotechnology) more
successful than firms in clusters that are less specific? For what firms
are specialized vs. less specialized clusters the best choice? How can the
cluster management contribute to the success of biotechnology ventures
(e.g., by establishing new partnerships between cluster organizations)?
Further, research at the interface of the firm and individual
level can investigate what combination of characteristics of biotech-
nology entrepreneurs and/or their employees is most important for
success given a particular firm strategy or business model. For
example, Patzelt et al. (2008b) found that entrepreneurial experience
in the pharmaceutical industry is particularly beneficial when ventures
develop biopharmaceutical products. What competencies and experi-
ences are beneficial for ventures active in green/white biotechnology
or service firms? And do the competencies required change over a
firm’s life cycle (e.g., is industry experience more beneficial when the
product comes closer to market)? How can members of a management
team combine their competencies (both from a process perspective and
regarding what competencies are necessary) to meet the challenges
faced in the best way?
Finally, scholars may also focus on cross-level effects between the
regional and the individual levels. For example, regional cultures
influence how individuals think and what their values are (Hofst-
ede, 1980; Schwartz, 1999). What is the effect of regional cultures
on the motivation and strategic decision making of biotechnology

entrepreneurs? Indeed, a recent study found that cultural similarity
has an even stronger effect on partner selection of biotechnology firms
than geographic proximity (Gilding, 2008). For instance, some cultures
are more uncertainty avoidant than other cultures (Hofstede, 1980).
Are biotechnology entrepreneurs in uncertainty-avoidant cultures more
likely to choose a service business model over a product-based business
model because the former is less risky? Further, there is heterogene-
ity across cultures regarding their collectivism/individualism. Do the
structure and prevalence of networks between biotechnology actors
in collectivistic and individualistic cultures differ? What is the role
of interpersonal trust and contracts in establishing network rela-
tionships in different cultures? Further, there may also be interplay
between individual competencies of biotechnology entrepreneurs and
the institutional environment of a region. For example, perhaps indus-
try experience is more important for entrepreneurs’ motivation and
success in regions where regulations are more complex than in regions
where they are less complex.
In conclusion, our review shows that although considerable work
has been done to improve our understanding of biotechnology at the
regional, firm, and individual levels, there are many open research
avenues for scholars interested in biotechnology entrepreneurship. We
hope that we stimulate additional research that addresses the research
gaps identified and contributes to further advancing this fascinating
field.
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Foundations and Trends R

2 Deﬁnitions and Concepts 68

4.1 Strategies and Business Models of Biotechnology Firms 83

5.1 Scientists in the Biotechnology Industry 107

6 Future Research and Conclusion 113

Holger Patzelt1 , Lars Schweizer2

period spanning 2005–2009. Further, US biotechnology ﬁrms employed

The term “biotechnology” is widely used and covers a number of dif-

“The term “modern biotechnology” refers to all innova-

To oﬀer more detailed pictures of biotechnology and of ﬁrms active in

2.1 Categorization of Biotechnology Firms

2.2 The Biopharmaceutical Value Chain

in very distinct areas of management, law, medicine, biosciences, and

Biotechnology research at the regional level has primarily focused on

3.1 Biotechnology Networks

new biotechnology ﬁrms’ formation of international strategic alliances

3.2 Biotechnology Clusters

biotechnology ventures in particular, the question arises how these net-

university thus facilitating the development of new products (Deeds and

which can contribute to developing a more positive picture of the

university can trigger cluster development (Waxell, 2009). A study by

3.3 Policy and Biotechnology Development

cluster development has been particularly driven by successful role

cluster development is also possible when ﬁrms draw on more distant

mobility, provision of capital, university–ﬁrm collaborations, and the

While research at the regional level is substantial, certainly most of the

4.1 Strategies and Business Models of Biotechnology Firms

growing because of the dynamic interplay of a wide range of tradi-

4.1.1 Strategic Orientation of Biotechnology Firms

sites that focus on conducting clinical trials signiﬁcantly outperform

4.1.2 Business Models of Biotechnology Firms

Given high R&D expenses, it is important for all biotechnology ﬁrms

In contrast, platform ﬁrms either sell their technologies at the

(1) Some young biotechnology venture mainly focus on the capa-

growing number of Contract Research Organizations (CRO)

4.2 Strategic Alliances

for biotechnology ﬁrms’ alliance formation, and subsequently review

4.2.1 Motives for Alliances in the Biotechnology Industry

well as a positive relationship with ﬁnance alliance partners. Moreover,

broad capabilities appear to be at least as eﬀective in predicting alliance

characteristics on VCs decisions to ﬁnance them. Their research ﬁnd-

4.2.2 Management and Performance of

as similar obligations and expectations are drawn toward each other.

addition to that, they are also disproportionately likely to be renegoti-

gain experience with alliances and develop these relational capabilities,

implies partnering with competing ﬁrms, can be linked to decreased

4.3 Mergers and Acquisitions of Biotechnology Firms

M&As have failed to achieve their objectives due to diﬃculties in the

4.3.1 Strategic Reasons for Biotechnology M&A Activities

When analyzing and synthesizing further articles and reports on

(1) Does the acquisition strengthen the balance sheet?

These key questions correspond to the main beneﬁts Patzelt et al.

costs when compared to building up the resources internally. Lastly,

(support of the pharmaceutical ﬁrms’ growth strategy by acquiring

4.3.2 Managing the Post-acquisition Integration of

dimensions of culture, human resource management, and organizational

Organizational integration. Frequent acquirers are more likely to make

autonomy of the acquired ﬁrms in order to avoid endangering their

Biotechnology research at the level of the individual is still sparse.

5.1 Scientists in the Biotechnology Industry

biotechnological knowledge is created, and how that knowledge can

To study scientists’ motivation to share knowledge with others and

5.2 Strategic Decision Making and

knowledge is transferred within or across organizational boundaries