Biotechnology Industry’s Networks and Alliances
Over the past decades, the biotechnology market has experienced enormous developments when it comes to networking and strategic alliance formation. The increasing need for technological learning, innovation, and understanding creation has triggered the necessity for inter-firm collaboration. According to Gottinger and Umali (2010), strategic collaboration requires “cooperative agreements for reciprocal job discussing through joint undertaking of study, production, and advertising whilst maintaining individual corporate identity during the lifestyle of the alliance” (p.101). Previously decade, biotechnology businesses have realised the dire need to engage in inter-firm alliances to converge and integrate complementary abilities from different, but essential entities. In a bid to accomplish sustainability in the biotechnology market, alliances and networking become inevitable especially in easing the burden of cost on study and development for new technical opportunities.
For example, Sytch and Bubenzer (2008) remember that the first biotechnology organizations, viz. Genentech and Biogen, that have been established in 1976 and 1978 respectively, experienced early results majorly because of alliances with different exploration and pharmaceutical labs. This step compelled other firms to create alliances for survival and expansion. Therefore, this exploration will explore why exogenous variables such as for example reciprocal technology sharing impact the biotechnology market to enter inter-organisational pacts. By doing so, this paper will be answering the issue on why and when networks are essential in improving sustainability in the biotech market.
Routines that biotech undertake
Biotechnology involves “technological programs that utilise biological organisms, processes, or systems to enable industrial manufacturing of particular products” (Powell 1998, p.238). Modern biology has become widely diversified in integrating additional disciplines such as chemistry, physics, and mathematics. The array of varied knowledge has been used in the biotechnology industry resulting in major contributions to the healthcare and common welfare of humanity. Biotechnological improvements have influenced several industrial undertakings that include production of chemicals, individual and animal meals, environmental restoration, and alternative sources of energy coupled with pharmaceutical and veterinary items (Sytch & Bubenzer 2008). The aforementioned activities are carried out in major areas of biotech applications, which include fermentation technologies, genetic engineering, biological fuel era, and medicine production.
Fermentation technology has recently realised major advancements and attention by most biotech firms due to its competitive edge and requirement of products. Medically fundamental medications, protein boosted meals, and agricultural inputs add to some of the items acquired through the fermentation technologies. In genetic engineering, biotechnology provides been used in genetic recombination to come up with genetically modified organisms that are even more adaptive to the ever-transforming climatic circumstances. Apparently, the biotech market has efficiently harnessed hydro, wind, solar, geothermal and nuclear ability. As fossil fuels become more and more depleted and high-priced, biotech is extensively networking to create highly economically and attractive solutions. In the market of medicine production, antibiotics have already been produced to regulate diseases. Biotech sectors have encountered the task of achieving commercial significance as a result of production costs and sometimes, the drugs may be toxic to humans or family pets. Therefore, this selection of activities in conjunction with economic and technological problems highlights the necessity for networking for creativity and survival (Oliver 2009).
The essence of inter-firm collaborations
Since its inception, biotechnology has influenced almost all areas of humanity. Biotechnology has considerably improved healthcare, assisted preserve the surroundings, reorganised industrial competitors, influenced policy-producing, and restored ethical purchase. However, the impetus to the success could be acknowledged to businesses’ adoption of inter-organisational ties. In the biotech sector, both exogenous and endogenous worries of alliance ties have pointed out positive results in the look, growth, technological learning, and trustworthiness of the firm. In a bid to stay relevant and aggressive in the manufacturing industry, biotech has generated some key reasons to keep up organisational ties and networking. Biotech businesses collaborate with complementary businesses to outsource specialised workforce in a bid to improve product innovation and share fees of generation (Gulati, Sytch & Mehrotra 2008). In addition they collaborate to create, produce, and market services whilst strengthening their popularity.
Biotech businesses embrace the rich trade of core technologies in addition to sharing the cost burden. For example, the medical biotech sector faces major shortcomings. Coping with the body and diseases is undoubtedly complex and expensive. Unlike other high-tech firms, the biotech product processing chain goes through thorough scrutiny. Most biotech projects take more than ten years to become ready for the market (Powell 1998). This aspect translates to high costs of production and the risks associated might be very detrimental for a single firm to bear. Other external challenges include costly regulations, lack of competitive edge by new firms, and the influx of products in the market. However, inter-organisational ties provide the solution since the financial burden is distributed across several partners. Some of the partners specialise on designing and production, while others may concentrate on tapping and developing new engineering, while others can perform the marketing and advertising. The convergence of thoughts and information results in the development of high-qualitygoods, which command reasonably competitive advantage available in the market (Oliver 2009).
Exploitation and exploration
In a bid to survive and remain cut-throat, firms must keep rate with the latest technology. Because the field of biotechnology is quite diverse, updating the emerging engineering can be extremely tasking for an individual firm. However, firms accomplish that aim forming alliances with complementary businesses in regions of research and development. For example, the pharmaceutical sector ensures a higher amount of research and development alliances to build up and commercialise new drugs since the demand is ever rising (Gottinger & Umali 2010). Exploitation entails engaging ties with some other firms to gain knowledge and edge to fresh opportunities. This goal is achieved after clearing technological uncertainties via strengthening the existing technologies. Biotech firms deal with complex issues pertaining to human wellbeing, which calls for specific information that provides tacit details on a specific process. Therefore, trust and long lasting relations govern such alliances before they can share core technology information. Exploration goes beyond effectiveness of current endeavours as it entails forming alliances that focus on new technologies, innovations, and manufacturing of alternative products. This element requires extensive networking with study labs and pharmaceutical industries to maintain standards and reputation (Powell 1998).
Criteria used by biotech firms in choosing a partner
Based on financial capabilities
Deciding on the best partners for a biotech firm needs technical and tactical techniques since it is probably the key strategic decisions that a firm can make (Villeneuve 2006). Most of the determinants leading to alliances in biotechnology are usually endogenous. Such motives are linked to the high costs of product growth in biotechnology and the remarkably unpredictable returns. The criterion of mate selection is highly inspired by the priorities that organisations set up (Ariño & Reuer 2006). The expense of product development has exposed virtually all biotech firms to stiff opposition from large corporations with regard to funding and advertising and marketing, which requires the forming of networks and alliances. This feature is inevitable for survival because the skills and information can’t be applied in the lack of the expensive technology.
Based on standing and legitimacy
For the start-up biotech organizations, joining partnerships is almost inevitable. Their growth relies mostly on their vast ability to trigger a partnership with set up organisations. However, the management initially seeks to know the reputation of the established company before getting into any alliance (Ranada 2003). If the customers have appreciated its earlier dealings, the reputation is probably high and the probability of the start-up company gaining the same status through association is large. When the products are legitimate, standing grows good and the start-up company gets the benefit of learning by doing. Once the standing is compromised, the start-up organizations can not only evade association, but additionally other complementing firms. Biotech sectors, when they realise steep opposition from established rivals, have a tendency to join efforts in order to avoid compromise of standards because of harmful competitions (Pangarkar 2003). This step ensures that the product quality is advanced coupled with improving standards.
Elements that affect alliance period
Many factors ranging from management problems to the attainment of major goals of an alliance influence the partnership duration. In many instances, inter-organisational alliances are made to last for long periods, since exchange of crucial details and technology requires a clear foundation of have faith in (Pangarkar 2003). However, because the problem of opportunistic haggling and very poor governance might occur along the way, the options of immature partnership are excessive. Most biotechnology organizations initiate partnerships without earlier partnership experience, so bringing exceedingly great degrees of managerial uncertainty to the alliance (Ariño & Reuer 2006). This aspect can lead to early termination of the deal to avoid inter-organisational haggling, which might damage the trustworthiness of both companies. Other features include failing project, lots of the biotechnological exercises are characterised by excessive uncertainties. If partners believe that the project they’re undertaking might find yourself failing, they may opt to terminate it at early stages to avoid losses or creation of substandard products. However, partnership may last for long period since most biotech routines take long period to mature (Gottinger & Umali 2010). In addition, the nature of the activities is complex and it utilises specific assets and are meant to suit a particular task, and thus they can not be redeployed to other scenarios.
Exiting strategic alliances
Under certain conditions, companions may uncover neutral or deteriorating consequences, and therefore they trigger the desire to exit an alliance (Villeneuve 2006). Splitting up is not easy if organizations lack an exit plan. Supervisors should make sure that the alliance agreement includes an exit clause. Prior organizing during engagement can save supervisors the exit grief and keep maintaining the company’s reputation.
The forming of alliances to support product invention possesses persisted in the biotechnology field and it’ll expand to meet the necessity for businesses to exploit and check out the impressive edge of complementing sectors. By learning from earlier alliances and organisational arrangements, supervisors have identified the necessity to set clear partnership agreements and defined exit clauses. Biotech sectors have realised economic chances and success which could have proved hard to attain in the lack of inter-firm collaborations.
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