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BEYOND THE BORN GLOBAL: UNDERSTANDING THE INTERNATIONALISATION PROCESS OF BIOTECHNOLOGY VENTURES Lisa Jane Hewerdine Business School University of Adelaide August 2008 ABSTRACT BEYOND THE BORN GLOBAL: Understanding the Internationalisation Process of Biotechnology Ventures The past decade has seen a surge of interest in ‘born global’ firms which internationalise rapidly following their inception. While born global internationalisation paths are commonly associated with high tech firms, there has been some limited research suggesting that biotech ventures do not fit this model. My aim, therefore, was to contribute to international business research by investigating whether biotech firms internationalise as is suggested by born global scholars. Accordingly, my research focused on examining how the internationalisation of these small firms with radical innovations might best be explained. My research proceeded by means of a comparative case study of four Australian biotech companies, with their internationalisation histories forming the focal unit of analysis. The first contribution resulting from my cross-case analysis is to show that oversimplified measures of firm inception have led to ‘conceptual stretching’ of the born global category. This does not imply that born globals do not exist; rather; I argue that greater care needs to be applied when measuring inception. Ultimately, biotech firms do not fit easily into the born global category because the lengthy innovation process they undergo means they are likely to have strong pre-organisational roots extending far beyond their incorporation date. This pre-organisational history needs to be factored in because of its effects on firm internationalisation. i My second contribution is to suggest a driver for internationalisation that to date has not been included in existing research into high tech firms: namely, the influence of the innovation process. The internationalisation decisions of the case firms could be explained to a large extent by the stage that their core technologies were at. The international partnerships that the firms signed were also very much affected by the uncertainties surrounding the intellectual property being exchanged. My contribution therefore lies in proposing that incorporating the innovation process can advance understanding of high tech internationalisation. I conclude by suggesting that theory development concerning high tech internationalisation should pursue further these linkages between innovation and internationalisation. ii TABLE OF CONTENTS Page no. Abstract i Declaration vi Acknowledgements vii Chapter 1 - Introduction 1.1 Research Genesis 11 1.2 Overview of the Chapters 12 1.2.1 Chapter 2 - Literature Review 12 1.2.2 Chapter 3 - Methodology 13 1.2.3 Chapter 4 - Country and Context – Australian Industry Analysis 15 1.2.4 Chapter 5 - Inception is a Process 15 1.2.5 Chapter 6 - The Role of Teams and the Entrepreneur 16 1.2.6 Chapter 7 - Explaining Internationalisation of the Case Firms 16 1.2.7 Chapter 8 - In Bed with a Multinational 17 1.2.8 Chapter 9 - Conclusion 18 Chapter 2 - Review of the Born Global Literature 2.1 Introduction 19 2.2 The Origins of Literature 20 2.3 Exploring Oviatt and McDougall’s Definition 22 2.3.1 The Point of Inception 23 2.3.2 Sale of Outputs and Use of Resources Internationally 25 2.3.3 Multiple Countries 28 2.4 Exploring Knights and Cavusgil’s Definition 30 2.4.1 Focus on High Technology/Knowledge intensive SME’s 30 2.4.2 International Entrepreneurial Orientation 35 2.4.3 Theoretical Frameworks of Authors 40 2.5 Conclusion 46 Chapter 3 - Methodology 3.1Introduction: Taking a Case Study Approach 49 3.1.1 Research Methods Used in Previous Studies 51 3.2 Case Selection 52 3.3 Researcher’s Industry Background 55 3.4 Data Collection 57 3.4.1 Interviewee Selection 61 3.4.2 Interview Guides and Content 66 3.4.3 Strengths and Weakness’s of Retrospective Interviewing 68 3.4.4 Feedback 72 3.4.5 Documents 72 3.4.6 Limitations of the Secondary Data 73 3.5 Data Analysis 74 3.5.1 Within-Case Analysis 75 3.5.2 Cross-Case Analysis 79 3.6 Philosophical Assumptions and Validity 83 iii 3.7 Conclusion 86 Chapter 4 - Country and Industry Context: The Australian Biotechnology Industry 4.1 Introduction 87 4.2 Defining Biotechnology 88 4.3 Size and Evolution of the Australian Biotech Industry 91 4.4 The Innovation Process: R&D and Commercialisation 95 4.5 Innovation Dilemmas: IP Management 100 4.6 Innovation Dilemmas: Partnering 102 4.6.1 The Biotech’s Perspective 103 4.6.2 The Pharma’s Perspective 104 4.6.3 Strategic Options 105 4.6.4 The Australian Industry and it’s International Alliances 107 4.7 Innovation Dilemmas: Funding 109 4.7.1 Government Policy 110 4.7.2 State of Venture Capital Market 112 4.8 Conclusion 116 Chapter 5 - The Process of Inception 5.1 Introduction 119 5.2 Understanding Inception: Insights from Entrepreneurship Research 120 5.3 Case Analysis 124 5.3.1 Pre-organisational Gestation Phase 124 5.3.1.1 BresaGen 127 5.3.1.2 Biota 128 5.3.1.3 GroPep 130 5.3.1.4 Cytopia 131 5.3.2 Resources and Exchange 133 5.3.2.1 BresaGen 134 5.3.2.2 Biota 137 5.3.2.3 GroPep 139 5.3.2.4 Cytopia 140 5.3.3 Boundary Definition and Intentionality 141 5.3.3.1 BresaGen 143 5.3.3.2 Biota 144 5.3.3.3 GroPep 145 5.3.3.4 Cytopia 148 5.4 Conclusion 149 Chapter 6 - Types of Founders and their Entrepreneurial Orientation 6.1 Introduction 153 6.2 Understanding the Individual 155 6.2.1 Characteristics and Personal Traits: The ‘Professional’ Entrepreneurs 155 6.2.2 Characteristics and Personal Traits: The Scientists 158 6.3 The Importance of the Team 164 6.3.1 Scientific Reputation and Networks 167 6.3.2 Friendship and Trust 169 iv 6.4 The Organisational Founder/Sponsor 170 6.4.1 Cutting the Purse Strings 172 6.5 Conclusion 175 Chapter 7 - Internationalisation Patterns of Case Firms 7.1 Introduction 177 7.2 Case Evidence 178 7.3 What Pattern of Internationalisation Is There? 180 7.4 Market/Relationship Uncertainty 185 7.5 Technological Uncertainty 189 7.6 Choice and Sequence of Foreign Market Commitments 193 7.7 Domestic vs. International Ties 199 7.8 Evolution of the Australian Biotech Industry – The Impact of Learning for Cytopia 200 7.9 Conclusion 202 Chapter 8 - In Bed with a Multinational 8.1 Introduction 217 8.2The Antecedents 218 8.3Searching for a Partner 221 8.4 Negotiating the Deal 223 8.5 A Landmark Deal 225 8.5.1 The First Agreements 227 8.5.2 Market Uncertainty – and Failure? 233 8.6 Cooperating for Innovation 234 8.6.1 Losing Control Over Product Development 236 8.6.2 Sustaining Relationship Commitment 239 8.6.3 Controlling the Uncontrollable 242 8.4 Conclusion 244 Chapter 9 - Conclusions 9.1 Why Study Biotech Firms and are they Born Globals? 247 9.2 Conceptual Stretching in Born Globals 249 9.3 Adding the Innovation Lens to Conceptualise the High Tech Born Global 253 9.4 Managerial Implications 256 9.5 Future Research Recommendations 257 Reference List 261 Volume I – Appendices Appendix I - List of Authors included in Born Global Literature Review 1 Appendix II - Sample Interview Guides 5 Volume II – Appendices Appendix I - The Case of BresaGen 1 Appendix II - The Case of Biota 179 Appendix III - The Case of GroPep 355 Appendix IV - The Case of Cytopia 425 v DECLARATION This work contains no material which has been accepted for the award of any other degree or diploma in any university or other tertiary institution and, to the best of my knowledge and belief, contains no material previously published or written by another person, except where due reference has been made in the text. I give consent to my thesis, when deposited in the University library, being made available for loan and photocopying, subject to the provisions of the Copyright Act 1968. ______________________ Lisa Jane Hewerdine August 2008 vi ACKNOWLEDGMENTS When considering such an achievement, one inevitably looks back along the journey. For me, the journey started quite some time ago. In brief, when I was a very young child, my mother asked me what I wanted to be when I grew up, as parents often do. My reply, I remember, to this day was, ‘A professor … ’ in what I didn’t know, and most likely I didn’t know really know what being a professor meant. My mother was dismayed, for she had long hoped for a hairdresser daughter to keep her hair looking beautiful, and after several provoking attempts at ‘are you sure you don’t want to cut hair?’ she relented. So in the first instance, thanks go to my parents – for letting me be whatever I wanted. Although I’m not a professor, I’m sure I can’t cut hair. Perhaps I’m leaning on the side of academe after all. With that said, I was blessed with a beautiful family: my grandmother Roma whom I adore, Aunty Joan who was always there, and Nana Crossman, who never doubted anything was possible! To these three outstanding women – I owe you thanks. All little girls should be as lucky to be raised with you as role models. But as to what’s possible, well here is where the other thanks are directed. Along the way, I was fortunate to come in contact with some very inspirational people. One of the first was Professor Ian Wilkinson. Ian saw in me something I couldn’t, and my love of international business was sparked by his dedication and enthusiasm and for this I’m grateful.