Innovation, networks and competition: the case of biotechnology

STUBRIN LILIA

Turunc

Otro; CISS - Competiton and Innovation Summer School; 2011

Katholieke Universiteit LEUVEN - Dusseldorf Institute for Competition Economics - European Science Foundation - Centre for European Economic Research

Knowledge-intensive activities are major engines of growth in modern economies. Accordingly, developing countries have been encouraged to foster the development of knowledge-intensive and high value added activities such as ICT, nanotechnology and biotechnology. These activities are believed to be new avenues these countries should explore in order to generate a 'decommoditization' of their patterns of specialization. We are concerned with the emergence and development of biotechnology. A stricking empirical observation is the great extent to which biotech firms participate in R&D strategic alliances in the leading biotech regions (Powell2005,Koput1997,Niosi2003,Owen-Smith2002,Powell1996,Deeds2004,Owen-Smith2004). These is generally explained by the complexity of the technology, the rapid peace of technical change and the long, uncertain and costly product development process in this field. In addition, studies highlight that the degree of firms' engagement in R\&D collaborations, and their position in strategic alliances' networks, is often useful in explaining firms' growth and innovation performance (Powell1996, Shan1994). However, what we know from leading regions does not necessarily apply or is useful to understand how a high tech activity such as biotech develops outside the main world hubs. In that regard, empirical evidence on the development of biotechnology outside leading biotech regions has recently begin to emerge (Kelvey2003,Gilding2008,Fontes2005,Belussi2008,Rees2005). These studies do find a high involvement of biotech firms in strategic alliaces in that regions. In addition, they also reveal that firms show a similar pattern of participation in R&D alliances which is at the same time different in many respects from the collaboration features described and analyzed for developed countries. We take up the new empirical evidence and create a model that contributes to understanding how knowledge networks are constituted, and accordingly, how the dynamic of R&D cooperations affect learning and innovation in technologically dynamic sectors in more laggard regions. Briefly, the resulting model accounts for the empirically observed patterns of firms' networking activity in the field of biotechnology both in leading and non-leading regions, based not only on acknowledging knowledge constraints within a certain location, but also incorporating an explicit market competition element. Our model shows that market competition plays an important role in explaining the nature of inter-firm collaborations and, therefore, firms' learning and innovation. In addition, as the model permits us to discern the knowledge-related reasons (i.e. absorptive capacity, learning opportunities) from the market rivalry-related reasons that affect firms' engagement in R\&D collaborations, it contributes to better understand the relation between innovation, networks and competition.