University-Industry Interactions: the Case of the UK Biotech Industry

Industry and Innovation, Dec 2006 by Smith, Helen Lawton, Bagchi-Sen, Sharmistha

ABSTRACT

This paper's focus is on both the geography of entrepreneurship and on industry-collaborative links internationally, nationally and at the local level in the UK biotech industry, the world's second largest biotech industry. The paper reports on a pilot survey of the UK biotech industry. The survey has two goals: to understand the business goals of the firms and to examine the relative importance of local conditions to the business of biotech. Further evidence on these two themes comes from two studies of Oxfordshire, one of the UK's centres of biomedical science and biotechnology. The first is a survey of the county's biotech firms. The second, of academic spin-offs, demonstrates how the business of biotech in the UK is intimately tied to the national innovation system, which in turn is dependent upon highly localised elite science which in turn signals to world elites that the region is a hot-spot for innovation.

KEY WORDS: Biotechnology, universities, business strategies, UK, public policy, Oxfordshire

Introduction

The genesis of the biotech sector as commercial activity, although closely associated with university research through spin-offs and collaborative connections with universities (Zucker et al., 2002), has a broader development trajectory. Among the other ways by which firms are established include being set up as a subsidiary of a foreign or domestic firm or as a spin-off from a hospital, state-funded or charitable trust research institute (Audretsch and Stephen, 1996). Even from the start-up phase, the commercialisation strategy of biotech firms normally includes cooperation with more established firms, as well as with the home organisation (Gans et al., 2002). In order to survive, biotech firms develop business models and strategies that incorporate science into product development, not only with local but also geographically distant organisations. They are, according to Owen-Smith and Powell (2004), embedded in multiple networks of strategic alliances through which they gain competitive advantage from continuous scientific and technical innovation. Hence, both entrepreneurial activity and processes of technology advance, including inter-firm collaboration, take place within interconnected national and local innovation systems. Firms are facilitated and constrained by these systems.

Against this background, this paper's focus is on both the geography of entrepreneurship and on industry-collaborative links internationally, nationally and at the local level in the UK biotech industry, the world's second largest biotech industry (DTI, 2005). The paper reports on a pilot survey of the UK biotech industry. The survey has two goals: to understand the business goals of the firms and to examine the relative importance of local conditions to the business of biotech. Further evidence on these two themes comes from two studies of Oxfordshire, one of the UK's centres of biom�dical science and biotechnology. The first is a survey of the county's biotech firms. The second, of academic spin-offs, demonstrates how the business of biotech in the UK is intimately tied to the national innovation system, which in turn is dependent upon highly localised elite science, which in turn signals to world elites that the region is a hot-spot for innovation.

The frame of reference for these studies is comprised of three aspects of the UK's national innovation system which we suggest are key to understanding the industry's trajectory (i) national policy and regulatory frameworks-government rules which influence the accessibility of knowledge, the conduct of its creation and diffusion, (ii) the stock of intellectual capital within the system-investment in and capitalisation of scientific research in universities and other non-industry research laboratories and the commercialisation strategies of the universities and other public research organisations (PROs), and (iii) the industry and its growth trajectory. We propose that with respect to biotechnology, the UK is a highly competitive model. The model's elements are a well-developed national innovation system which comprises an elite model of science, an entrepreneurial university system (Etzkowitz et al., 2000) and a pragmatic regulatory system comprising the commercial, legal and ethical framework (Salter and Smith, 2002). Collectively, these contribute to a stronger business environment than that in other European countries (House of Commons, 2003).

The following discussion is presented in five parts: the first part provides a conceptual framework built beginning with national innovation systems and extending to local scientific and entrepreneurial environments. The second part provides an overview of trends in the UK biotech sector. The third part reviews the evidence from the national pilot survey. The fourth links evidence from the Oxfordshire studies to this survey. In the last, some conclusions are drawn.

National innovation systems, local support systems and business strategies