Partnering strategies in biotech firms : an evolutionary perspective

The aim of this paper is to understand the partnering strategies of Dedicated Biotech Firms (DBFs) in the context of an analysis of the evolutionary dynamics of the biotech industry. While often, the biotech industry is considered a radical novelty: a competence-destroying, newly-emerging sector stemming from science-based firms involved in the commercialisation of science, other authors have highlighted the symbiotic division of labor existing among the new biotech firms and the older traditional pharmaceutical firms, which base their development around the consolidated knowledge derived from the chemical discoveries. This has led some researchers to maintain that DBFs largely exploit their valuable knowledge by allying with incumbent pharmaceutical firms that possess complementary assets. In our opinion, it is necessary to add some caution to the idea that DBFs are, in principle, organisationally weak actors, incapable of giving rise to a new evolutionary market niche. While prior work has focused largely on biotech-pharma alliances, we believe that biotech firms are also engaged in a large number of bio-bio alliances. Considering that they do not have prior alliance experience, they choose a bio-bio alliance to avoid the strong bargaining power during the contractual design of large pharma firms. This industry, thus, is characterised by an open-ended process of competition among different business models and market niches and by a still-undetermined and uncertain path of co-evolution. Our theoretical framework is based on capabilities and evolutionary theories of the firm. Using a sample of 530 U.S. and 237 E.U. biotech firms, we test and find support for our arguments