City Research Online City, University of London Institutional Repository Citation: Mc Namara, P. (2000). Managing the tension between knowledge exploration and exploitation: the case of UK biotechnology. (Unpublished Doctoral thesis, City University London) This is the accepted version of the paper. This version of the publication may differ from the final published version. Permanent repository link: https://openaccess.city.ac.uk/id/eprint/7870/ Link to published version: Copyright: City Research Online aims to make research outputs of City, University of London available to a wider audience. Copyright and Moral Rights remain with the author(s) and/or copyright holders. URLs from City Research Online may be freely distributed and linked to. Reuse: Copies of full items can be used for personal research or study, educational, or not-for-profit purposes without prior permission or charge. Provided that the authors, title and full bibliographic details are credited, a hyperlink and/or URL is given for the original metadata page and the content is not changed in any way. City Research Online: http://openaccess.city.ac.uk/ [email protected] Managing the Tension Between Knowledge Exploration and Exploitation: The Case of UK Biotechnology By Peter Mc Namara Presented in fulfilment of the requirements of the: Degree of Doctor of Philosophy Strategy and International Business City University Business School Department of Strategy and Marketing March 2000 TABLE OF CONTENTS ACKNOWLEDGEMENTS ........................................................................................................................... 14 DEDICATION .......................................................................................................................... 16 ABSTRACT .......................................................................................................................... 17 CHAPTER ONE INTRODUCTION RESEARCHQUESTIONS ................................................................................................................. 20 1. FROM A TI IEORFTICAL PERSPECTIVE. WHAT IS THE KNOWLEDGE EXPLORATION/EXPLOITATION DII.EMMA?......................................................................................................................................20 2. Is THERE EVIDENCE WITHIN A REAL ORGANISATIONAL CONTEXT THAT A FIRM'S ACTIVITIES CAN BE EXPLAINED THROUGH TUE CONCEPTUAL LENS OF BALANCING A TENSION BETWEEN KNOWLEDGE EXPLORATIONAND EXPLOITATION9..............................................................................................21 3. Do THE FINANCIAL MARKETS REWARD ANNOUNCEMENTS OF EXPLOITATION ACTIVITIES WITH HIGHER RETURNS THAN EXPLOR.\TION ACTIVITIES, AS PREDICTED BY THEORY9...........................22 INDUSTRIALCONTEXT ................................................................................................................. 23 BIOTECHNOLOGYDEFINED ............................................................................................................23 APPLICATIONSOF BIOTECHNOLOGY AND REGULATION..................................................................24 PATENTS: THE REWARD FOR HIGH JUSKS AND COSTS OF REGULATORY APPROVAL.........................25 BIOTECHNOLOGYAND THE PHARMACEUTICAL SECTOR.................................................................28 SA1IPLE SELECTION .32 UK BIOTECHNOLOGY AND THE TENSION BETWEEN EXPLORATION ANEXPLOITATION ACTIVITIES ........................................................32 SELECTIONOF SAMPLE COMPANIES ...............................................................................................33 STRUCTUREOF THESIS ................................................................................................................. 36 CHAPTER TWO THE ANTAGONISTIC NATURE OF KNOWLEDGE MANAGEMENT: THE BALANCE BETWEEN KNOWLEDGE EXPLORATION AND EXPLOITATION INTRODUCTION .............................................................................................................................. 45 CONTRIBUTIONOF THIS CHAPTER..................................................................................................48 STRUCTUREOF THIS CHAPTER ....................................................................................................... 49 EXPLORATION/EXPLOITATION AS A TRIAD: EXPLORATION, DEVELOPMENT AND USEFOR APPROPRIATION ........................................................................................................... 51 EXPLOR:\TION................................................................................................................................51 DFVEIOPMENT ..............................................................................................................................53 The11,1k heg tee,z Exploration azd Dei'elopnent.....................................................................54 DistziiguLslung Developuienifroin Use for Appropriation ......................................................58 Usi: FOR APPROI'RIM IO\ .............................................................................................................. 59 PROI'osmoNs: VAI.IE AI)DEI) AND KNOWLEDGE EXPLORATION EXPLOITATION..........................61 NOXAKA'S KNOWLEDGE SPIRAL AND EXPLORATION/EXPLOITATION ...................... 64 ANTAGONISTIC PROCESSES ........................................................................................................ 67 CURl: RIGIDITIES ...........................................................................................................................67 SIOW RA Fl: OF Ll:RNING.............................................................................................................68 IMITATION.....................................................................................................................................70 COMPLEMENTARITYOF ANTAGONISTS.......................................................................................... 71 SOME PI\OTAL CHARACTERISTICS IN THE ANTAGONISTIC NATURE OF KNOWLEDGEMANAGEMENT ..................................................................................................... 72 MOVEMENTS BETWEEN THE PROCESSES OF EXPLORATION AND CORE RIGIDITY (FIGURE Two).. 72 Mavericks................................................................................................................................74 PersonnelTurnove...................................................................................................................75 Unlearning..............................................................................................................................76 MOVEMENTS BETWEEN THE PROCESSES OF DEVELOPMENT AND SLOW RATE OF LEARNING (FIGURE THREE) .......................................................................................................................................... 77 Slack ........................................................................................................................................ 79 CommonCodes and Shared Language ................................................................................... 81 Experimentation ...................................................................................................................... 82 MOVEMENTS BETWEEN THE PROCESSES OF USE FOR APPROPRIATION AND IMITATION (FIGURE FouR) ............................................................................................................................................ 83 COMPLEM ENTA RITY AND ANTAGONISM BETWEEN CHARACTERISTICS..........................................87 CONCLUSION .................................................................................................................................... 88 CHAPTER THREE BALANCING KNOWLEDGE EXPLORATION AND EXPLOITATION IN A REAL ORGANISATION OVER TIME: LESSONS FROM THE CELLTECH CASE INTRODUCTION ................................................................................................ 97 THEORV.............................................................................................................................................. 98 METHODS AND DATA COLLECTION ..................................................................................... 101 Sot R( I S OF D.i .. VALII)ITV .\D RLLIAI3II ITY ........................................................................ 101 Till I\1 I R\ IFW I'ROCI SS ............................................................................................................. 102 CI .ssII IC 1 I0\ UI ACTI\'ITIFs As EXPlORATION AND EXPLOITATION ....................................... 104 AN OVERVIEW OF CELLTECH .................................................................................................. 107 EXPLORATION/EXPLOITATION AS A LENS IN UNDERSTANDING CELLTECH'S RENEWAL ....................................................................................................................................... 110 EXPLORATIONEXPLOITATIoN INSIDF THERAPEUTICS ................................................................. 112 FROM CORE RIGIDITIES TO EXPLORATION FOR NEW CORE CAPABILITIES: ACTIONS TAKEN TO PROMOTE EXPLORATION AND EXPLOITATION INSIDE CELLTECH ....................................................................................................................................... T16 CRLATINGA CRISIS ...................................................................................................................... 117 UNLEARNING, REORGANISING AND NEW RECRUITS......................................................................119