The effect of ambidexterity on the
internationalization process: The role of
national institutions.
An exploratory study based on the life sciences in the
Netherlands and the United Kingdom.
Student: Hien Le 6067123 Supervisor: Prof. Dr. S. Rodrigues Master of International management Co-reader: Niccolò Pisani
Table of Content
List of tables………....P.3 Abstract………P.4 1.Introduction………...P.5 2.Literature review………...P.8 2.1.1Ambidexterity……….….P.8 2.1.2 Exploitation………P.9 2.1.3 Exploration………P.10 2.2 Internationalization………..……P.11 2.2.1 Antecedents and facilitators of internationalization……….….P.12 2.3 Institutions………..P.13 2.4 Biotech industry……….….P.14 2.4.1 Biotech industry in The Netherlands………...P.15 2.4.2 Biotech industry in the United Kingdom………...….P.16 3. Research Method and design ………...……….P.19 3.1 Research scope………..P.19 3.2 Research design……….…………..….P.19 3.3 Data collection and data analysis methods……….…..…P.21 4. Research findings ………..…P.23 4.1 The biotech industry in the Netherlands………p.23 4.1.1 Ambidexterity of the biotech sample in the Netherlands………..…....…P.25 4.1.2 Internationalization of the biotech sample……….……...…P.28 4.1.3 The role of institutions……….…..P.30 4.2 The biotech industry in the United Kingdom………...……….P.33 4.2.1 Ambidexterity of the biotech sample in the United Kingdom………..……P.34 4.2.2 Internationalization of the biotech sample………P.37 4.2.3 The role of institutions………...……....P.40 5. Discussion. ………...P.43 6. Conclusion………...…….P.50 7. Management implications and future research………...…P.51 References………..…………..……P.53 Appendix 1: Porter five forces analysis industries………..….p.56 Appendix 2: Scales of measurement internationalization………...p.57List of tables
Table 1: General characteristics of interviewed biotech SMEs in The Netherlands... 20 Table 2: General characteristics of interviewed biotech SMEs in The United Kingdom……21 Table 3: Topics analysis………...22 Table 4: Firm characteristics of the Netherlands………..23 Table 5: Firm characteristics of the United Kingdom………..33
Abstract
The purpose of this thesis is to find out how the effects of ambidexterity impact the internationalization process and what roles national institutions plays. A qualitative research was adopted based on the life sciences industries from the Netherlands and the United Kingdom in the form of a multiple case study. The main findings are that the effects of ambidexterity do impact the internationalization process where national institutions also play a role. The exploration-exploitation activities differ from each country while having a positive impact on the internationalization process. However, the institutions from the U.K. have a bigger role in the internationalization process than institutions from the Netherlands. There are effects of ambidexterity on the internationalization process but the effects are different for each SME because of the type of markets the SMEs are in and the type of stage of development they are in.
1 Introduction
There are more and more internationalized SMEs in the last two to three decades. This was mainly an activity conducted by large firms. Moreover, their characteristics and behavior are different from large firms (Bell et al., 2003; Buckley, 1989; Ojala, 2009). Due to their smaller size, SMEs have fewer resources available than large firms. The barriers to internationalization will be higher as internationalization is a resource demanding activity. Their liability of smallness (Jansson & Sandberg, 2008) implies a lack of managerial resources (Buckley,1989) and financial resources (Yip, Biscarri & Monti, 2000). In order to overcome their resource contraints and to gain access to the resources they lack, SMEs may use their network-ties (Bell, McNaughton, Young and Crick, 2003; Harris and Wheeler, 2005).
However, the internationalization process in the biotech sector differ from each country due to their firm specific factors, industry effects and institutions. Successful firms usually have unique capabilities, such as new processes, product technology, routines or access to markets (Casper and Whitley, 2004; Coviello and Munro, 1997). However, it is not sufficient to ensure good performance and an increase in market share (O’ Reilly and Tushman, 2004). Therefore, firms need to know how to transform their innovations into products that will fill market requirements. In order to do both exploration and exploitation successfully, a broad set of resources and skills is required, including relevant knowledge, know-how, financial capital, sales, and distribution channels and business development skills (Pellikka and Lauronen, 2007).
Firms need to be ambidextrous – to be able to balance their exploration and exploitation activities – to remain competitive over time (Johanson and Vahlne, 1977; Oviatt and McDougall, 1994). According to Levinthal and March (1993), long-term survival and success depends on an organization’s ability to ‘engage in enough exploitation to ensure the organization’s current viability and to engage in enough exploration to ensure future viability’ (p.105). March (1991) state that an ambidextrous organization can lead to better performance than when exploration and exploitation are not balanced.
SMEs account for more than 95 % of all firms in many countries (Chiao et al. 2005). They not only play a major role in developing economies such as Holland but also in emerging economies such as Brazil. However, SMEs are becoming more internationalized in the international market but little is known about the effects of internationalization on the organizational ambidexterity and vice versa in the biotech industry. Organizational
ambidexterity can be divided in different contexts such as organizational learning, technological innovation, organizational adaptation, strategic management and organizational design (Raisch & Birkinshaw, 2008). Moreover, the institutions play a vital role in the biotech industry because there are concerns when it comes to producing new drugs for example. The focus in this thesis will be on the adaptation of biotech companies from different national institutions.
Each SME has their own firm specific factors/advantages where balancing exploration- and exploitation might be difficult. Therefore, it is difficult to measure what would be the best strategy to have superior performance. This may be due the management within the firm. The technological innovation within the sectors might therefore be different in order to be efficient and flexible. However, it would be more difficult when biotech companies that adopt an ambidextrous strategy internationalize in different host countries with strong institutions and/or weak institutions. The internationalization influences therefore their strategy, which can a effect on their performance.
There are several motives for SMEs to internationalize. This might be growth opportunities (OECD, 2009), or the availability of knowledge or strategic resources in foreign countries (Freeman, et al., 2010). It might also be because heavy competition in the market, or because the home market is saturated or too small (OECD, 2009). The network model of internationalization provides an explanation as to why small firms are able to internationalize given their liability of newness and liability of smallness. Networks can act as an initiator in the internationalization process which mean the network will support a firm by providing access to information and resources (Bell, McNaughton, Young and Crick, 2003; Harris and Wheeler, 2005).
SMEs that are going to expand abroad might not balance their exploration- exploitation activities, which mean that according to March (1991), it cannot create superior performance. However, this paper will examine how ambidexterity affects the internationalization process in different biotech industry with different institutions. Therefore, explanatory research that provides insights into the exploration and exploitation activities that influence internationalization process and it effects of institutions of SMEs in the biotech industry is expected to fill this gap in the literature. A comparison between two different national institutions and markets can give an indication how the impact of ambidexterity will have on the internationalization.
This thesis addresses these considerations by investigating the following main research question:
How does ambidexterity affects the internationalization process and what are the effects of national institutions?
This main research question is further divided into the following set of interrelated research questions:
• What is the difference between the UK biotechnology and the Dutch biotechnology? • What are the exploration- and exploitation activities that the biotech sector are seeking
in when using an ambidextrous strategy?
• What are the effects of institutions in the internationalization process and what is the difference between the Netherlands and the United Kingdom?
By doing this, the research aims to provide a coherent view on how ambidexterity (exploration- and exploitation) influences the internationalization process within the biotech SMEs from different industries.
This thesis focuses on two sectors within the industry, medical and healthcare sectors due to the high degree of required knowledge, their launch of successful products (which takes a lot of time to test and innovative character). However, even though the life sciences & Health cluster (biopharmaceuticals) has a strong knowledge base, strong innovation infrastructure and highly educated people, the cluster’s performance has been assessed as ‘low’ on number of products launched on the market (Van Eenennaam & Koosmans, 2011). This indicates that the biotech sector may have problems with their performance with regard to the speed of internationalization process that might be influenced by their exploration- exploitation activities, which makes researching this issue worthwhile from different economies.
2 Literature review
In this section, an overview of the literature will be given. First, ambidexterity will be explained to some extend and what it is to have ambidexterity in an organization. Then exploration and exploitation will be explained. Second, the process of internationalization will be explained and antecedents and facilitators. Third, the institutions will be explained and what the differences are between the institutions in The Netherlands and the UK. At last, the industry characteristics will be given of each country.
2.1 Ambidexterity
There are different types of concepts of ambidexterity and several scholars have discussed ambidexterity. The concepts of ambidexterity have been extended to structural ambidexterity (Tushman and O’Reilly, 1996; O’Reilly and Tushman, 2004), contextual ambidexterity (Gibson and Birkinshaw, 2004) and organizational ambidexterity (Raisch and Birkinshaw, 2008). Duncan (1976) argued that ambidexterity should be managed through ‘dual structures’. Tushman and O’Reilly (1996) argue that if firms are to compete successfully, managers must balance contradictory structures, skills and cultures. Ambidexterity has also been discussed in the context of internationalization by managing the diverse demands of ‘transnational capability’ which is the ability to manage across national boundaries and retaining local flexibility while achieving global integration (Bartlett and Ghoshal, 1988, p.66). However, ambidexterity does not guarantee success according to O’Reilly and Tushman (2004) because it increases the possibility of being able to shape the evolution of the firm.
The concept of contextual ambidexterity depicts that in a given firm, rather than having separate units or teams involved in structural ambidexterity, individual employees make strategic choice between alignment-oriented and adaptation-oriented activities within the context of their daily work routine. The more the company emphasizes performance management and social support, the more likely are its employees to behave ambidextrously (aligned and adaptive) and the more likely the firm is to achieve high performance (Birkinshaw and Gibson (2004).
A one-sided focus on exploitation may enhance short-term performance, but it can result in a competency trap because firms may not be able to respond adequately to
environmental changes (Ahuja & Lampert, 2001; Leonard-Barton, 1992). Conversely, too much exploration may enhance a firm’s ability to renew its knowledge base but can trap organizations in an endless cycle of search and unrewarding change (Volberda & Lewin, 2003).
Ambidexterity is particularly consistent with the cultural, institutional, and economic conditions facing SMEs. Culturally, many emerging economies have a long tradition of upholding harmony (e.g., East Asian yin-yang philosophy) and valuing inter-personal and inter-organizational relationships for business transactions (Hoskisson, Eden, Lau, & Wright, 2000; Peng & Luo, 2000; Yiu, Lau, & Bruton, 2007).
Due to frequently weak legal protection and limited property rights, and the absence of large well-regulated markets, business enterprises in many emerging economies have to rely on such relationships to gain access to resources or markets (Meyer, 2004). Business relationships with external stakeholders (e.g., rivals, sup- pliers, governments) must in these conditions be both competitive and collaborative, requiring an ambidextrous balance between the two (Luo and Rui, 2009).
2.1.2 Exploitation
Exploitation activities tend to benefit a firm’s short-term profitability (March, 1991). It can associate exploitation activities with alignment, which means being aware if how value can be created in the short term by coordinating and streamlining the business’s activities (Birkinshaw & Gibson, 2004). Exploitation is centered on the current products or capabilities of a company and its goal is to exploit these current products and capabilities by focusing on cost saving activities or activities intended to increase productivity for example (Benner & Tushman, 2003). Exploitation focuses more on the business development side.
One of the advantages of exploitation is that it is relatively low risk. That is, the benefits or pay-offs from exploitation are more certain than with exploration. However, when focusing too much on exploitation can be bad for a firm as well, companies may miss opportunities because they become too rigid and integrated, which makes them incapable to adapt to changing environments. This is also known as the competence trap.
Exploitation can lead to incremental innovations or innovation intended for existing customer groups when linking exploitation activities to innovation (Benner & Tushman, 2003). These types of innovation, at least some part of the knowledge or technology is already
known to the company, which will then be refined and developed further.
The goal of exploitation, increasing efficiency and productivity, has been found to influence by different factors like the corporate structure. By having decision making centralized will generally lead to higher efficiency and speed, which will translate into higher short-term profitability. Moreover, a highly integrated organization will also be beneficial when trying to follow an exploitation strategy as problem solving and decision making speed will increase (Benner & Tushman, 2003).
2.1.3 Exploration
Exploration
Exploration activities are needed for long-term survival in a constantly changing environment (Levinthal & March, 1993). This relates to the adaptability according to Birkinshaw and Gibson (2004), which means that firms are able to adjust quickly and move to new opportunities when the need arises. Examples of exploration activities include activities focusing on increasing flexibility and activities focusing on innovation (Benner & Tushman, 2003).
The downside of exploration is that it entails high risk. It is hard to assess what the exact benefits will be of something novel. It is hard to predict how the environment will change, what consumers will want and what competitors will do. Moreover, the pay-offs of exploration will only occur in a remote future, which might not always be the priority of managers who are assessed on their current performance. The result of exploration activities (new technologies) may also have negative implications for certain parts of the organization (March, 1991). Old knowledge may be rendered useless which may spark resistance from certain parts of the organization.
Therefore, exploration is needed to stay healthy in the long run. If a firm does not innovate, it might miss attractive opportunities. However, putting too much focus on exploration can be costly as well. First, exploration requires high investments and second, the investment of scarce resources into exploration reduces the amount of resources that can be invested into exploitation. This means that the benefits of the current capabilities will not be reaped to the maximum extent. If a firm takes this to the extreme and never tries to reap benefits from newly developed capabilities, it suffers from the exploration trap.
Not all types of innovation should be considered as exploration. Only architectural and radical innovation fall under exploration because these innovations build on new types of knowledge and are generally intended for new customer groups (Benner & Tushman, 2003).
2.2 Internationalization
The internationalization of SMEs became an important topic due to their operating activities across a border that was an activity mainly conducted by large firms. Over the last decades, many small firms have internationalized. The behavior and characteristics are different from MNEs (Bell et al., 2003; Buckley, 1989; Ojala, 2009) and traditional internationalization theories and models are mainly based on the behavior of MNEs, which is therefore relevant to research internationalization of SMEs separately since traditional theories cannot simply be applied to them.
There have been different theoretical frameworks used to examine the internationalization of SMEs, including economic theories such as the eclectic paradigm (Brouthers et al.,1999) and transaction cost economics (Errmalilli & Rao, 1993), stage model theory (Johanson & Wiedersheim-Paul, 1975), network theory (Coviello & Munro, 1995), and resource-based view theory (Westhead, Wright & Ucbasaran, 2001). There are at least three major stage models: The export stage model of internationalization (Bilkey and Tesar, 1977), the establishment chain model (Johanson and Wiedersheim-Paul, 1975; Johanson and Vahlne,1977,1990), and the firm level stage model of internationalization (Luostarinwn, 1980). The internationalization process can be described by means of two state aspects (market knowledge and market commitment) and two change aspects (commitment decisions and current activities). The firms are also expected to enter markets with successively greater psychic distances (Vahlne and Wiedershein-Paul, 1973).
However, over the last decade, there have been an increasing number of studies focusing on the fact that many new ventures internationalize rapidly after start-up in a fashion that is not consistent with the slow process described by the Uppsala school (Aspelund and Moen, 2001;Moen, Gavlen, Endresen, 2003). These new ventures are proactive searching new markets whereas they can protect and exploit proprietary knowledge. Furthermore, they are motivated to expand abroad because of their competitive advantages, and first-mover advantages (Graves & Thomas, 2008).
The term born global firms refers to companies that internationalize immediately (Bel et al.,2003). Their pattern of internationalization cannot be explained in traditional concepts
because the traditional concepts assume that firms first have to focus on the domestic market for a period of time before starting the internationalization process (Johanson & Vahlne, 1977), and SMEs have fewer resources available for entering high distance markets (Buckley, 1989) which would force them to take small steps to internationalize. Yet, there are many small firms who are internationalizing fast which poses the question why they do so since they expose themselves to the high risks and also how they are able to do so while there are suffering from resource constraints.
There are different kinds of internationalization strategies (licensing, establishing an overseas sales office or an manufacturing plant), a firm can used. Exporting is considered the most common foreign market entry mode due to the minimal business risk and capital required (Leonidou & Katsikeas, 1996).
2.2.1 Antecedents and facilitators of internationalization
SMEs internationalize for different reasons. There are general push and pull motives for internationalization. SMEs might be motivated to internationalize by pull factors such as growth opportunities (OECD, 2009), or the availability of knowledge or strategic resources in foreign countries (Freeman et al., 2010). However, on the other hand, SMEs might also internationalize by push factors because of the heavy competition in the domestic market or because the home market is saturated or too small (OECD, 2009). Moreover, heavy regulations in the domestic environment can also be a driver to look for opportunities elsewhere (Tatoglu, Demirbag, & Kaplan, 2003). Finally, firms can also internationalize because competitors do it as well (Mcdougall, 1989).
Over the past years, an increasing number of studies have also been dedicated to better understand why small firms are able to set up international activities at such an early stage given the many barriers connected to internationalization. Prior studies have shown different, but complementary reasons to explain born global firms ‘ability to internationalize quickly. First, the barriers to internationalization have been reduced due to a globalized world (Frankel, 2000). There are macroeconomic changes that have led to increased internationalization. The rapid and accelerated internationalization of born global firms has been made possible by technological developments and increased mobility (Oviatt & McDougall, 1997). Also, the physical distance matters less due to better communication technology and lower cost of transportation. This makes the resources more transferable. Furthermore, administrative barriers have gone down (Hill, 2005), making it easier for firms
to internationalize because markets have been deregulated and economic trade has been made easier by special policies such as EU, BRIC, NAFTA (Hessels & Kemna, 2008).
There are also some firm specific reasons why certain firms have the ability to internationalize immediately after inception. Research has shown that born global firms are often technology intensive or knowledge based firms (Bell et al., 2003; Ojala, 2009) often targeting niche markets (Bell et all., 2003). Knowledge based firms can internationalize fast because the knowledge base serves as a core competence (Bell et al., 2003). Additionally, these firms may use different governance structures, like franchising or licensing, which might help fast internationalization (Oviatt & McDougall, 1994) and help overcome resource constraints (Sasi & Arenius, 2008). Moreover, the (international) network relationships may also facilitate the internationalization process (Coviello & Munro, 1997).
2.3 Institutions
Institutions are a set of informal or formal rules, which can be fulfilled only by people acting collectively, in established complementary capacities or offices (Scott, 1995). They consist of formal (regulatory), normative, and cognitive structures and activities that provide stability and meaning to social behavior. The regulative pillar focuses on the constraining and regularizing aspects of institutions. Central are rule setting, observation, control and sanctioning of behavior. The normative pillar concerns the prescriptive, evaluative and obligatory dimension of institutions (Scott, 2001). The cognitive pillar represents cultures and symbolic aspects of social life (Scott, 1995). The World Bank defines institutions as sets of formal and informal rules governing the actions of individuals and organizations, well as the interactions of participants in the development process (World Bank, 1999). Organizations follow norms, not purely because it is directly in their interests on the basis of a cost-benefit calculus, but because compliance is expected and there is a moral obligation to meet expectations (Scott, 2001).
Countries that have strong formal institutions have a more independent judiciary, efficient and effective legal systems clearly delineated and well protected property rights, and government officials who are more neutral and do not favour well-connected firms and individuals.
The government play a vital role in setting the necessary foundations for sustainable development and economic growth or political stability cannot be achieved in the context of weak or non-existent institutions (Seyoum, 2009). The lack of independent judiciary, secure property rights, and rule of law is creating obstacles for private investment in many developing countries (Kumssa & Mbeche, 2004). The development of the biotech companies is affected by it because they have to rely on the rules on the institutions when developing new drugs for example. The internationalization process of the biotech companies is therefore dependent from national institutions. This is because each institution from countries has different rules.
Biotech companies that internationalize have to adapt to their host country. The process can take longer because the government in different countries have stricter rules when it comes to modern biotechnology. Not only the government but also informal institutions can express their concerns which affect the internationalization process. Informal and formal institutions are two distinct sides of the same coin that cannot be treaded separately (Giddens, 1986). According to the research of North (1989), individuals would be less willing to engage in opportunistic behaviour in countries with strong institutions, as they have confidence in the existing rules, contracts, and property rights of society.
2.4 Industry characteristics biotechnology
Biotechnology is considered one of the most advanced and growth prone industries of the late 20th century. However, there is no one set of definition of biotechnology. In the literature, biotechnology has not been defined clearly, even in articles dealing with primarily with the business aspects of biotechnology.
The US Office of Technology assessment (OTA), in 1984 a US governmental office came up with a first definition of biotechnology as follows: ‘’Any technique using organisms and their components to make products, modify plants and animals to carry desired traits or develop micro-organisms for specific uses’’. A narrower OTA definition was: ‘‘New biotechnology is the industrial use of recombinant DNA, cell diffusion and novel bio processing techniques’’. In 1992, the Hebrew university defined biotechnology as ‘’The (direct) manipulation of nature for the benefit of mankind at the subcellular and molecular levels’’ (Haim Aviv, 1998).
A other definition from the biotechnology for the Science minister of Israel, biotechnology is defined as ‘’including all the products that are being used in the biological processes, systems, or organisms, or based on the fruits of biological research for use in medical applications, agricultural applications, and other areas’’ (Haim, Aviv, 1998).
There is thus a high degree of science involvement, and it can be said safe to say that biotechnology is probably the most science intensive discipline with the highest input level of academic research (Minister of Industry and Trade, May 1999).
2.4.1 Biotechnology in The Netherlands
The outlook of the life sciences in The Netherlands is positive. However, it still has some difficulties. Since, the Netherlands only belongs to a small portion of the biotechnology in Europe in market share, they have to be innovative in order to be competitive (Market Industry, 2013). The difficulties that Netherlands is acquired are fund raising, a small domestic market, and lack of venture capital industry for small firms. A lack of capital is could be harmful for the Netherlands because the only option that they have left is to bargain the start-ups away to Big Pharma in order to survive (Nautadutilh, 2013).
The fragmentation and a perceived lack of priority within universities make it difficult to attract investors or venture capitalists. This is because financing of academic research is insufficient towards turning science into business. The real bottleneck is a lack of funding and freedom to operate within universities to take an idea from merely being a scientific hypothesis to a proof of concept on which a business cases can be built (Nautadutilh, 2013). The role of the government is not very clear. The long-term government policy toward the life sciences sector is lacking. The short-term policies can easily lead to mismatches. There is a plethora of government facilities through which start-ups can obtain seed capital. One of the most important facilities is the Pre-Seed Grants initiative of NGI, LSH, and ZonMW. Through this initiative, biotech entrepreneurs may receive up to 250.000 euros to fund the costs typically incurred when starting a small biotech company (NautaDutilh, 2013). Another facility is the WBSO, which provides for the beneficial tax treatment of labour costs for personnel active in research and development. A related measure is a corporate tax deduction for R&D costs. However, it is only beneficial for big players. That is because start-ups firms are not profitable during their life cycle.
Innovation credits and fund-of-fund investments are other forms of government support. Innovation credits are only granted to companies, which also have private funding.
This is appreciated because private funding can be seen as a type of quality control for the government funding because many subsidies by the government are wasted due to the fact that many companies have little prospect of success (Nautadutilh, 2013). Fund-of-fund investments are investments made by the government in Venture capital funds, which in turn invest in biotech companies.
The protection of intellectual property is strong, however, it makes it difficult to work together with other firms because of the intellectual property. The market is still new since the Netherlands got a late start in biotechnology (Marketline Industry, 2013). In order to work together, there has to be made clear terms and conditions regarding licensing deals and royalty calculations. A common point of criticism is that the technology transfer function in the Netherlands is very fragmented. This is how the entire academic landscape is often viewed with each institute running its own shop (Nautadutilh, 2013). There are many spin-offs from universities, which are too small and are launched too early to survive, and could benefit from maturing longer within a university. Therefore, a venture capitalist would rather invest somewhere else with fewer spin-offs that are successful.
The number of seed-capital investors is relatively high. That is because you can easily visist 5 or six funds by bike and that should be enough to fund your business. (Nautatilh, 2013). However, funding raising is difficult for companies that don’t focus on making science a profitable business in which investors are interested. VCs are perceived to be an important driving force behind the forging of ever-closer relationships between Dutch biotech’s and Big Pharma. This is because of the given increasing costs and complexity involved in the development of new drugs where most industry professionals no longer consider it a realistic option to do this as an independent company funded only by VC (Nautadutilh, 2013).
It is expected that many young biotech companies will share a future with a big pharmaceutical company. Biotech companies and their venture capital investors need Big Pharma for their exit because Big Pharma depends on biotech for innovation. An alliance with Big Pharma is likely to be the predominant strategic goal of Netherlands biotech companies in order to survive. Big Pharma in turn, can outsource R&D activities to early-stage biotech companies, in an attempt to boost overall productivity and launch successful products.
The Netherlands has a strong science base with a strong knowledge base, innovation infrastructure and demand for innovations. The public opinions is very open for new innovations unlike other European countries (Marketline Industry, 2013).
2.4.2 Biotechnology in The United Kingdom
The outlook of biotechnology in the UK wasn’t positive during the economic/financial crises in 2008. However, it is now positive with an annual grow rates of 6 % (Market Industry, 2013). The life sciences industry in the UK is one of the biggest in Europe aside Germany. The market in the UK is matured. However, acquire funds is still difficult because there are many biotech firms. In order to gain funds they have to come with a long-term plan and a clear vision. The problem is that they don’t come with a plan on how to earn money with it or even having not considered earning money with it (Nautadutilh, 2013). This makes it difficult to attract capital from investors compared to the US where they do have a long-term plan and this attracts investors to invest in them (Nautadutilh, 2013).
There are several incentives to foster the development of the Life Sciences industry in the United Kingdom. First, the government fosters the development of the life sciences industry. They have several policies in the U.K. that are fostering the development. The R&D tax credit for small firms in which cash grants can be claimed against R&D spending (Reenen, 2002). The small business corporate tax reduction gives firms a boost to survive and develop innovative products. Significant government subsidies to MIT, corporate venturing in which the government is making it cheaper for large companies to invest in smaller companies (Reenen, 2002).
Second, the universities are encouraged to commercialise more of their research, which is a priority of public policy. But there is a genuine concern that encouraging the protecting of intellectual property in universities could undermine the ‘open science’ that gives the moral incentives for academics to do pioneering research (Reenen, 2002). The U.K. has had a more flexible attitude to university staff working in private sector than in other European countries (Reenen, 2002). The U.K. accounts for 10 per cent of global pharmaceutical R&D and while there has been some scaling-back of R&D budgets in recent years, the response has been to close some major company facilities and re-site others closer to science and technology parks (Global LS, 2012). Lastly, the collaborations with biotech firms and licensing deals have increased over the couples of years.
The United Kingdom scores well on having a good environment for biotechnology. That is that they have a strong science base and pharmaceutical industry with capital and labour markets playing a subsidiary role (Market Industry, 2013). The UK equity markets are deep and liquid and well integrated into global markets with London being one of the top three financial centres in the world (Reenen, 2002). However, over the year there have been
numerous complaints regarding the U.K’s financial systems in providing finance for innovation (Reenen, 2002). The City is seen as ‘’short-termist’’ and demands unrealistically high hurdle rates. Also, little venture capital goes into early-stage companies.
The labour market is less regulated than other parts of the EU so it is easier to recruit and retain the talented individuals that the biotech sector relies on (Reenen, 2002). Furthermore, it is easier for scientists to spend time in the private sector than in other European countries and lower marginal rates of taxation on high earning individual in the U.K. make it easier to recruit and retain talent (Reenen, 2012). Britain is particularly strong in the life sciences relative to physics, engineering and maths (Reenen, 2012). However, the area where the U.K. is slipping is the R&D intensity. The U.K. invests less in human and physical capital. There is a perception that cultural attitudes toward risk are an important factor in accounting biotech success in which the U.K. is more a risk-averse culture than U.S.A. (Reenen, 2012).
The regulations in the U.K. are strict. This is because of the constraints on government spending which lead to tighter drug pricing and reimbursement policies (Global,2012). Drug policies are regulated by the Pharmaceutical Price Regulation Scheme (PPRS), with the National Institute for Health and Care Excellence (NICE), evaluating the cost and effectiveness of treatments and agreeing which drugs should be publicly funded. (Global, 2012). Some of NICE’s decisions to refuse access to new treatments have been politically difficult and unpopular, both with the pharmaceutical industry and the public (Goblal, 2014, p.19).
The government plans to introduce a new value-based pricing (VBP) system to contain expenditure on medicines while raising purchasing power and improving access. The price the NHS will pay for a new drug will depend on the strength of clinical data demonstrating superior efficacy and safety compared with existing treatments, including societal benefits (Ibid; in Global, 2014). The launch of a new patent box regime will give companies tax breaks on revenue earned from innovation, aimed at making the U.K. a more favourable location for pharmaceutical R&D. Using the five forces framework of Porter, we can analyse the level of competition within an industry and business strategy development of the Netherlands and the U.K. (in Appendix 1)
3 Research Methods
3.1 Research scope
This research focuses on the Dutch and the UK SMEs from the biotechnology industries because SMEs accounts for more than 50% of the national economy. In our sample we use the definition of OECD of SMEs by limiting our sample with less than 250 employees. The SMEs have to be internationally active, and in the literature the term internationalization is often synonymous to international sales (Mcdougall, 1989). However, in this thesis, internationalization will be defined as any type of international activities performed by the firm. This could vary from collaborations for R&D purposes with universities to international sales by overseas distributors.
For this thesis, the medical and healthcare sector have been selected because it is one the biggest sectors in each of the country. Also, the industries are characterized by fast internationalization (Ojala, 2009).
3.2 Research design
This research will attempt to explore how ambidexterity affect the internationalization process and whether national institutions play a role in influence the ambidexterity strategy and internationalization process.
A qualitative research method will be most suitable (Thietart, 2001) because this research method is most useful to explore organizational goals, linkages and processes in organizations (Marshall & Rossman, 1995).
The case study method has been chosen as the type of qualitative research method to be used because case studies are best when the research focuses on contemporary events, the researcher has no control over the investigated events and the research focuses on a how and why research question (Yin, 2003). This is the case in this research. There will be more cases used in the study because according to Yin (2003) a multiple case study is more reliable than a single case study.
However, the optimal sample size in a multiple case study cannot be derived from a formula but is a choice of the research and depends on the certainty that the researcher wants to achieve (Yin, 2003). More cases are especially necessary when the realm of external validity is complex (Yin, 2003). This is the case in this research because of the extent of SMEs, which can differ a lot when a firm has 10 employees, and 100 employees, which are both SMEs.
First, suitable participants needed to be identified and contacted for this research. To find companies, company lists of major science parks in the Netherlands and UK were consulted. Firms that were suitable were first sent an e-mail including a summary about the research.
Interviews were scheduled with the CEO or another manager that has knowledge about the internationalization process of the company and that are involved in exploitation- and exploration activities of the firms that were willing to participate. Overall, 15 companies were interviewed for this research: 9 companies in the Netherlands and 6 in the United Kingdom.
The sample consists of SMEs of different sizes, age, and they are from a variety of places to control for complex external validity. Table 1 and 2 show characteristics of the Netherlands and the United Kingdom. All companies and interviewees have been presented anonymously as agreed with the participants.
The biotech sample of the Netherlands was very diverse because it consists of firms with a size between 1 and 120 employees with a mean average 25 and a median of 23 employees and the firms were founded between 1985 and 2006 (Table 1). The biotech sample of the United Kingdom was less diverse than of the Netherlands. It consists of firms with a size between 5 to 50 employees with a mean average 27 and a median of 23 employees and the firms were founded between 2001 and 2007 (Table 2).
Table 1. General characteristics of interviewed biotech SMEs in The Netherlands
The
Netherlands
Interviewee Position
Founded Employees Core product/service Location
Biotech 1 CEO 2006 1 Marine research inventory and strategy
Leiden
Biotech 2 Business Developer
2006 12 Technology for mice to produce high affinity human antibodies
Rotterdam
Biotech 3 CEO 1985 55 Development for new techniques for DNA analysis
Amsterdam
Biotech 4 CEO 2000 7 Develops and manufactures antibody reagents for cell biology
Maastricht
Biotech 5 CEO 2000 37 Unique proprietary array-based platform to measure the activities of kinases and nuclear receptors
‘s-Hertogenbosch Biotech 6 General Manager 2005 25 Development of molecular innovative signature-based diagnostics Rotterdam
Biotech 7 CEO 2003 20 Development of medicines for the treatment of devastating brain deseases
Leiden
Biotech 8 Manager 2001 50 Virology testing targeting in respiratory viruses
Rotterdam
Table 2. General characteristics of interviewed biotech SMEs in The United Kingdom
The United Kingdom
Interviewee Position
Founded Employees Core product/service Location
Biotech 1 Manager/scientist 2004 45 Developing proprietary
technologies for immunogenicity assessment
Cambridge
Biotech 2 CEO 2005 5 Development and commercialisation of new
therapeutics to treat cancer patients
Cambridge
Biotech 3 COO 2007 50 Supplement of research tools to organisations engaged in genomics research
Cambridge
Biotech 4 CEO 2005 15 Specialization in rapid diagnosis and research relating to infectious disease
Birmingham
Biotech 5 Scietist 2005 15 Clinically supported service for rapid diagnosis and management of infectious and genetic disease
Birmingham
Biotech 6 Medical chemist 2001 30 Offering drug discovery services to external partners, while developing it’s own pipeline of novel
oncology drugs.
Cambridge
3.3 Data collection and data analysis methods
General information about each company such as history, size, CEO and management background, core product or service, networks and activities was gathered by doing a media analysis. This gives the researcher to become more acquainted with the companies’ businesses so that the interview could become more in depth.
The main topics that were discussed during the interview were firm characteristics (foundation, funding or financing, core product or service, competition, exploration-exploitation activities, employee background, management and core capabilities), network characteristics (function of network relationships and type of network relationships), institutional characteristics (Government, regulations, protection) and the internationalization process. The interviews were semi-structured were a question list with key question was used. However, the interviews had an open character and differed as a result of the answers of interviewees.
All the interviews were recorded so that details from the conversations would not be lost and so that the interview could be transcribed afterwards. This makes the research more
transparent in order to cope with the methodological limitation of qualitative research (Yin, 2011).
After the interviews were transcribed, the transcripts were imported and coded by using NVivo qualitative data analysis software. The software allows the researcher to view all the information from the interview on a chosen topic, which gives a clear overview of commonalities and differences between the sample firms on a given topic. Each topic was viewed individually to analyse relationships and similarities between firms. Table 3 shows which topics were discussed.
Table. 3 Topics analysis
Firm characteristics Exploitation-Exploration activities characteristics Network relationships Characteristics Internalization characteristics Ambidexterity characteristics Institutional characteristics
Foundation year Radical/increme ntal innovation Network relationships/col laboration Countries Performance management context Law, regulations, rules (regulative) Core competence and product/service Spin-offs, new entrants/entranc e by incumbents Function network relationships
Mode Social support context Cultures and ethics (cognitive) Degree Competition Frequency of interaction Alignment Ownership characteristics Transitional process Adaptive Number of employees Stable clients Intellectual property rights/patents Environmental change/market conditions CEO and management background Employee allocation (RD & BD) Mode of foundation
4 Research findings
4.1 The biotech industry in the Netherlands
Table 4 shows the firms characteristics of the nine interviewed biotech firms. The left part shows the organizational structure of the firms in which we can see how these employees are allocated to exploration (R&D) activities and exploitation (business development) activities. Under management characteristics information is given on the background of the CEO, the management team and the supervisory board. It explains what type of educational and/or professional background the people in senior management positions have. This data come from the interviews as interviewees, were asked to tell about their background and the background of the company.
The firms in the sample differ a lot when it comes to the allocation of resources to exploration or exploitation. As can be seen in Table 4, biotech firm 1 and biotech firm 8 focuses heavily on exploration but biotech firm 1 has only two employees while biotech firm 8 has fifty employees. The biotech firms that focus more on exploitation are biotech firm 2 and biotech firm 3.
Table 4 Firm characteristics of the Netherlands
Netherlands Organizational Structure Management Characteristics
Employee allocation E-E % CEO Background Management team Supervisory board Exploration Exploitation Biotech 1 2 RD 100% 0% Biologist focused on marine environment Scientists Biotech 2 5 RD, 7 BD 42% 58% Business background 4 scientists, 1 business background Biotech 3 17 RD, 38 BD
30% 70% Scientist All scientists
Biotech 4 5 RD, 2 BD 71% 29% Scientist focused on cell biology 3 scientists Biotech 5 27 RD, 10 BD 73% 27% Bio-chemist and researcher on human genetics All scientists Biotech 6 18 RD, 7 BD 72% 28% Scientist of Hematology All scientists Biotech 7 15 RD, 5 BD 75% 25% Bio-medical scientist and former CEO of other biotech All scientists Biotech 8 43 RD, 7 BD
85% 15% Scientist 4 scientists and
1 business Biotech 9 84 RD, 36 BD 70% 30% Business background 1 business background and four scientists
It can be concluded that scientists are well represented in senior management positions for the Netherlands looking at the management characteristics. In many cases, the CEO (scientist) is also the person who founded the company. This is probably to commercialize his or her own research. Moreover, the CEO or founder initially is a researcher or professor at the university and then spins off of a company. As Figure 1 shows, in our sample 67% of the biotech SMEs is a university spin-off.
Figure 1. Mode of foundation The Netherlands
This mode of foundation is very common because the universities support it. Spin-offs from the university can be more explorative because they do only research on a certain aspect in order to find new developments:
‘The discovery of clinically applicable gene signatures from cancer cells in AML patients led to the founding of [Biotech firm 6] in 2005. There was a landmark paper written by founder before the company has been created. It was printed in the New England Journal of Medicine,
which is one of the highest prestigious journals in the US. And in the paper you could detect that there was different marker and AML. We did an investigation and set those different markers. And later on, we developed, because we were convinced of the fact that we could
develop a product out of this. It took us five years to develop the AML profiler and it has success in different markers on it and all those markers are in accordance with the WHO important in the classification and the detecting AML. AML is Acute Myeloid Leukaemia, which is cancer of the blood and finds of certain markers we had and diagnose them. So we
67% 11% 22%
Biotech Foundation
University Spin-off Entrepreneurial Hospital/Research Spin-offwould like to develop in collaboration with the Hematology department of the reputable university a diagnostic device where if we put bone marrow on it we could say after three
days that someone had that marker, that marker or that marker.”
-CEO, Biotech SME 6
As there are a lot of CEOs who has a life science background, it does not mean that the firm is more explorative focused because not all the experience is captured from the formal background. We will therefore focus on ambidexterity.
4.1.1 Ambidexterity of the biotech sample in the Netherlands
The focus of the biotech SMEs in the Netherlands are most on exploration based on employee allocation. This is because R&D employees are more valuable in the company than other types of employees that can be outsourced. When they need a specific type of employee for the firm, they will hire one usually for a short period of time:
“I try to do everything myself at the start and then I outsource. […]Or that’s none of my main… also I would say in business development if I also at the start I’ve always done it, if I
get a very big project I tend to always hire somebody else with me regardless if I need it because I think I see lots of other smaller companies go bankrupt or ruined because they don’t do that; because they take projects for let’s say nine months, nine months they work completely on their own on that project, okay they get a lot of money; I work for four and a half months or five months on that project and I also let somebody else also get some money from it. In the end I have another person who if he or she gets in the same situation will also hire me and that has worked very fast also for networking to get a lot of people that also ask
me to accompany them with their project. […]”
-CEO, Biotech SME 1
Therefore, many biotech SMEs try to balance their exploration-exploitation activities while also being focus and adaptive. One of the reasons to balance their activities is because of the risks. Biotech SMEs knows that the market and environment continually change and having different exploitation activities such as sales in other countries and different explorations activities such as research of different types of technology gives them independency. If one product of them turns into a failure in a country, they still have other countries to exploit. Also, researching in different developments reduced the chances of failure than when the
focus is one development. Furthermore, some biotech firms of the Netherlands offer not only products but also services:
“It’s difficult to say. If you look to the markets, especially when you’re looking to the companies that have a very broad portfolio, then you see that the portfolios of different companies are overlapping; when you’re looking to the smaller companies what smaller companies try to do is try to find unique products, because we, as a smaller company, if you are focussing on the same market as the bigger distributors then at the end you are controlled with the fact that you have hundred products, and a few hundred products you cannot do a lot of business. So we are just looking to that niche where they look for us as the company with good quality, good know-how, but also a company that can have access to local university or the national universities to get additional products. So if you look into our marketing strategy
of course we like to get a lot of different products because it’s always nice to have a lot of different products, because if you have a customer buying one product […] that he’s buying
some of the other products that’s nice. But we surely like to have some more innovative products and in fact compared a little bit to the pharmaceutical industry we are also looking
in the niche market that we are in to some highly specialised products on which the return that we can get later on can be very interesting. If you look into our portfolio then you are just
looking to how many of our products are just to […] the 80% or 90% of our sales and just 20% of our products. So that means that when you can add to that 20% of products you can add an excellent new product, then your sales can increase rapidly; that’s also our goal. But apart from that we say “Okay, we are in this business and if a customer is buying one of our
speciality products and also he needs something else he can take it also from us.” -CEO, Biotech SME 4
However, one of the biotech SMEs did lost over control in one their project because people weren’t focused on that project due to the fact that they were doing their own things. Choosing companies who you like to work with makes a huge difference:
“Definitely. We see that some project that we did ended quite fast again because we were not aligned. People that despite having conference calls were still doing their own things. You can easily spoil a scientific experiment by injecting animals in the wrong way or whatever, so
anything can happen. So we have really preferences of organisations and in the end it’s just people that you have preferences for. There are few people on the other side, these pharma
companies that you like to work with, then it makes a huge difference.”
Both exploration and exploitation activities are important for biotech SMEs. However, because each biotech SMEs has their own expertise, they have their own market niche. This could lead to different priorities for some biotech SMEs in which biotech SMEs wants to focus on their niche but also have to think about their shareholders/Venture capitalists or generating cash. Some biotech SMEs could exploit their products or services and grow exponentially. However, they don’t do that because they want to stay innovative or divide their risks because patents or licensees do expire:
“Well at this moment I am already full any moment and every time I want and now comes the point where you have to choose how large you want to grow. I want to grow to maybe five to
ten people because I want to stay in that innovative part. “
-CEO, Biotech SME 1
“Yeah. Because basically what is for company of interest is to generate enough cash flow, and to generate cash flow you need to have products. And it can become risky if you have all
these specialty products and if the product is failing then youhave nothing. So what we are trying to do, especially in recent years, is to find a solid base of sales and add to that some of
our specialty products; that’s the main goal of the company.”
-CEO, Biotech SME 4
Some biotech SMEs are sometimes more focused on their exploitation activities because they are offering a product or service that has little to no competition or aren’t attractive to enter the market:
“Yes. Well we do keep the prices quite low and we are able to produce it inexpensively, because we can make our own enzymes. And also that we have a broad range of products that
are on itself not really profitable. So it’s not really interesting for competitors to enter the market.”
-CEO, Biotech SME 3
Network relationships are important for both exploration-exploitation activities. Some of the biotech sample wants to network in order to collaborate and some to distribute/sell their product of service. Others build relationships to fund their business or promote their business for credibility and reputation. The internationalization process will therefore be influenced. We will focus on the internationalization.
4.1.2 Internationalization of the biotech sample
The internationalization level of the biotech sample in the Netherlands range from sporadic to advanced (in Appendix). Every biotech SME has regular sales or consistent contacts for R&D with more than one country. One biotech SME has only foreign sales while others have foreign sales range between thirty per cent and ninety-five per cent. The internationalization process begins at the start of some biotech SMEs while some starts when launching their product or service. Moreover, a lot biotech SMEs works with research institutions, universities or hospitals where they have contacts with people who are from everywhere. Therefore, they have an international work environment because they work with a lot of people who are international related. A lot of the customers are international which mean that internationalization among the biotech sample is very common in the Netherlands. One of the reasons is because the market in the Netherlands is too small and there is more potential international:
“ […]Yeah or directly from us. But we usually deal with customers in the following. They call us and they say “oh we like your products, but don’t you have one for blablabla?” and if it’s interesting then we evaluate their request and then it can go into development. And that’s all done behind computers. And then when it’s done for production, after quality control, it’s produced in batches. So we have boxes like this, containing seven tubes. And those are sold in
over 80 countries. And in approximately 20 countries we have distributors. […] Well usually there is a customer in that new country that would like to use our product and they will ask or
come to us directly. We can just ship directly, or if we can’t, they will ask other companies in that countries, like “hey can you deliver us those products?” and then those companies contact us like “oh we want to sell your products”. And we have a procedure for it to screen
the companies and see if they meet our quality-standards”
-CEO, Biotech SME 3
The customers from the biotech SMEs are very diverse and comes from everywhere. However, the customers only come to those SMEs when they have heard of them. Many biotech SMEs got recognition from research publications in life sciences journals. Others promote themselves by visiting conferences of their niche in order to gain knowledge, collaborate, grants and customers:
“Sales, international congress, because we detect our customers in international congress […] It’s February last year, 2011, we internationalized and How we do it, of course for marketing. One of the marketing tools we do have is visits and have a booth on international
conferences in haematology world, but then in terms of increased awareness we publish literature and go to oncologists to gather round new information. And we did in June this year, and we will attend another conference in Amsterdam and we will have a group meeting
with experts, explaining and sharing all of that information they already have with our products”
-General Manager, Biotech SME 6
Building a relationship can be very crucial and therefore you have to take the time to network. Many biotech SMEs go to conferences when they feel like it and only when it is necessary for example to gain new knowledge:
“That’s a good question. What we did from the onset of the company in 2004 is go to partner meetings. In the life science, you have the BIO, for instance, which is a huge partnering meeting in the US every year, and then you have – in Europe, you have the BIO Europe meetings; recently there was a Bio Europe spring meeting in Amsterdam. So those meetings you have electronic systems to get together between small bio-techs and the large pharmas to
show what you have and to see whether there is a match. So you have a schedule of twenty meetings per day at a BIO meeting where, in little booth things, you are meeting every half an hour another company. Those meetings are really crucial to get to know each other, to start a
relationship. Those things are being catalysed a little bit in the Netherlands by the organisation Life Science Health, so if you go to LSH.nl Large Science Health, they are an umbrella organisation for the life science sector in the Netherlands. They, for instance, take
care – at the bio meeting there is also a booth of the Dutch delegations and people get together there, they stimulate and people are part of that. So that helps in the knowledge
generation about the internationalization”
-CEO, Biotech SME 7
Biotech SMEs internationalize in countries where the life sciences industry is advanced, with a big market and stable environment. U.S.A. is the biggest life sciences industry in the world and most of the foreign sales come from U.S.A. The biotech SMEs in the Netherlands has a lot of foreign sales or contacts with western countries. With the other countries, there is less contact or business because of barriers such as language or lack of knowledge of regulations. Also, the stage in life sciences in those countries is less advanced which makes it less attractive to do business with.
Every biotech sample has several contacts in different countries. However, they only approached them when it is applicable:
“It’s concentrated here, and here we have some international relationships also with other companies. What we are trying to do in this and also a little bit in that, because mainly this is
on… the IP that we have is an IP, there’s a patent which has been granted recently in the US which can be used in both fields of applications. We are, for the time being, trying to prepare
the internal relationships to find collaborations in the market, which means that we have contacts in Germany, we have contacts in the Netherlands, we have some contacts in the
United States, there’s a contact in Japan; but basically there we have a portfolio of international contacts and following then a certain strategy in how we are approaching those
people.”
-CEO, Biotech SME 4 Most of the biotech SMEs from the sample is a spin-off from the university or research institute. Regulations from the government and other institutions can boost the internationalization process or influence the exploration-exploitation activities of the biotech SMEs. We will focus on the role of institutions.
4.1.3 The role of institutions
Institutions can be beneficial for biotech firms in the Netherlands. Tax reduction on innovation or funding from the government or other institutions gives biotech firms the opportunity to bring innovative products or services on the market. However, some firms do benefit from it and others don’t. First, the problem is that the Netherlands has a lot of rules, which makes it difficult to start a company:
“I think in the Netherlands they tend to have a lot of different rules and so on. I tend to really read myself into all the taxes that I have to pay and those kinds of things, but that’s… I can imagine a much easier system also in other places. I think there are a lot of things that you have to think about to start a company here with all the regulations that we have here. In other places I think it will be easier. […]There are lots of regulations. It’s just like if you want
to start up a company – okay, I did not do it – but I think you should almost have a degree at your department, so have a business degree to start up your company I think. I think that’s
almost obliged if you want to be successful in the Netherlands. […]”
Second, funding your business is a difficult task in the Netherlands when having a unique business. Venture capitalists wants usually a return on their investment and as a start-up you have to keep that in mind which makes you dependent. Also, in order to get grants from the government, a proposal has to be written:
“I was used to writing grants a lot in my university and research period and then usually you had to write an 80 page project proposal and so on for getting a certain amount of money, and now I write one page and then I can get some money for the same kind of project. […] There are lots of regulations. It’s just like if you want to start up a company – okay, I did not
do it – but I think you should almost have a degree at your department, so have a business degree to start up your company I think. I think that’s almost obliged if you want to be
successful in the Netherlands.”
-CEO, Biotech SME 1
“For reimbursement in medical, reimbursement is very difficult in Holland. And also the
clinical community is, is extremely conservative, they don’t like so much innovation.” -Scientist, Biotech SME 9
Lastly, the government does provide money but they don’t provide everything for your investment. This makes it difficult for start-up to grow to the next stage when they don’t have much cash to support their product or service:
“I’m not aware of how much but they provide part and we have to pay part ourselves. So if you have a product, which probably, let’s assume, costs one million, they provide one part
and the other part you provide yourself. So it’s not that they will fund everything.” -General Manager, Biotech SME 6
“Sure, but grants are always restricted to, pre competitive and collaboration, whatever, and we really need the money for product development and marketing and sales, and you can’t get
funds for, to support marketing and sales. So there you need to, you just need to, capital, from the capital market.”
-Scientist, Biotech SME 9
The advantage that they have with institutions is that they can collaborate with universities or hospitals that has the resources and contacts. Networking is therefore really important for start-ups, which is the advantage in the Netherlands because there is a Science park that has a lot of contacts everywhere:
“The problem for a company that is in the Netherlands to talk about domestic sales is that we have a lot of collaborations, so we work with all the universities in the Netherlands, right,
which means that most of those universities have access to our technology. Many of them have an instrument already, because of the relation, they’ve got an instrument and we collaborate with research, and the model there is that we then file for a patent. The university
pays for half of the filing costs, we pay for half of the filing costs, and the contracts have a clause where we can have the commercial rites if we pay a certain amount of money. That’s
the deal with those universities.”
-CEO, Biotech SME 4
“It’s all great, so, so everything, everything great. Great collaboration, and if you want to do research in Holland, very good. If you want to have international people working for your
company, great. If you, if they need to come from abroad, great organisation. Tax regulation, great… support from government institutions, whatever. Everything is great up until you need to sell something, it then becomes very difficult. So, so if your business model
does not contain having to sell in the local market it’s a great, it’s a great place.” -Scientist, Biotech SME 9
Some biotech SMEs from the sample from the Netherlands has venture capitalists. However, these venture capitalists aren’t from the Netherlands and some biotech SMEs make even use of funds from the Europe union or other countries.
There are differences between the life’s sciences industry of the Netherlands and the United Kingdom. In the next paragraph, the focus is on the biotech sample of the UK.
