Alessandro Rosiello

A Critical Assessment of Regional Innovation Policy in Pharmaceutical Biotechnology

ABSTRACT This paper adopts a system-evolutionary perspective to describe the dynamics of the life science sector and reflect on regional innovation policy. It begins with a brief outline of the evolution of life sciences and of the biotechnology industry. A crucial feature of such evolution is the strong tendency towards geographical concentration of research and related economic activities. The formation and growth of bio-clusters have sometimes appeared to be spontaneous, in that governments have not been in the driving seat. However, many regional and national governments have now developed policy frameworks to support the development of bio-clusters. Regional and evolutionary economics contribute to explain cluster emergence and growth, but little is known about pre-emergence conditions. As a result, although policy measures aimed at supporting emergence and growth are grounded on direct evidence and observable transformations, starting clusters from scratch often involves replicating the pathways followed by successful regions. We examine the rational behind regional innovation policy in life sciences and the reasons why some policies have either succeeded or failed. Special emphasis is placed on Scotland, where the local development agency has pioneered the implementation of cluster thinking to support the development of the life sciences sector.

Evolutionary interpretation of venture capital policy in Israel, Germany, UK and Scotland

Despite many attempts to develop high-impact venture capital (VC) policies, most VC markets in Europe are still underdeveloped. Many of these policies were based on ‘traditional’ (Rosiello et al, 2009) VC policy involving a mix of monetary incentives and institutional changes. In this article, we present an alternative evolutionary VC policy, which is based on a dynamic analysis of emergence processes and on the co-evolution between VC and entrepreneurship, as well as on a dynamic and adaptive view of policy. The article presents four case studies of VC development: Israel, UK, Scotland, and Germany. Evolutionary VC policies rely on few major factors: i) a strategic objective and a long-term commitment to enhancing VC market and high-tech cluster emergence and development, ii) a phased-policy portfolio including both direct and indirect VC-policy components, and iii) a dynamic policy process, which is adaptive to the specific context. Copyright , Beech Tree Publishing.

The Patterns of Venture Capital Investment in the UK Bio-Healthcare Sector: The Role of Proximity, Cumulative Learning and Specialisation

This paper focuses on the patterns of venture capital (VC) investment in dedicated biotech firms (DBFs) in the therapeutic and diagnostic sectors (bio-healthcare). We use a database of 655 UK bio-healthcare deals to map the geographical flows of VC investment and measure the co-location of investors and DBFs. Then, using 20 face-to-face interviews with venture capitalists (VCs) and DBF firms in Cambridge and Scotland, we study the strategic motives underlying the co-location of investors and investee companies and reflect on the catalytic role VCs play in context of the Scottish and Cambridge bio-clusters. From the viewpoint of VC-related policies, we find that our study is more in line with arguments stressing the attractive power of ‘investor-ready’ opportunities (Mason and Harrison 2003) than supply-side approaches that take for granted VC presence at the core of high-tech clusters. In line with Avnimelech, Rosiello, and Teubal (2008), we propose that VC policy should be consistent with the wider strategic objectives of innovation and technology policy.

Evolutionary policy targeting: towards a conceptual framework for effective policy intervention

This special issue reflects on innovation and industrial policy from the premise that economic growth can be based on the permanent transformation of an economic system via the emergence and/or transformation of multi-agent structures and their inherent competences and knowledge base. The process of emergence or transformation is conceived as being the result of entrepreneurial effort, or entrepreneurs reacting to external stimuli in a way that takes advantage of an evolving knowledge base. The same process, however, can be undermined by both market and institutional failures. Past research has clearly indicated the importance of institutional structures for innovation, but also that structures as they exist may not be ideal: some institutions involved in innovation may provide the wrong incentives, faulty information, or allocate insufficient resources to accomplish their goals or mandates; and they may fail to reduce uncertainty. The paper asks whether and how a targeted, co-evolutionary approach can help overcome a lack of dynamic coordination and other failures that originate in coincidence with the emergence of a complex form of industrial organisation, be it an innovation system, cluster or a new industrial sector. More specifically, it builds upon the extended industry life cycle (EILC) model and the notion of evolutionary targeting to explore the potential benefits (and drawbacks) of targeting biotechnology innovation systems (BISs).

Rethinking Innovation Systems in Life Sciences: Implications for Regional and Innovation Policy

In recent decades, the use of cellular and molecular processes to develop new technologies, products and services has resulted in applications for a number of industrial sectors. Although the structure of these industries is changing, expectations for economic growth remain strong, with major implications for both national and regional innovation policy. At the same time, technological change does not seem to originate uniquely from the mere application of life sciences. An independent body of knowledge interconnected with questions of industrial development, economic viability, public safety and social acceptability, contributes to the emergence of innovative products and processes. Markets, societies and biotechnologies tend to co-evolve in complex and sometimes unpredictable manners. Thus, the influence of the life sciences on the evolution of national and regional innovation systems is increasingly understood as a “non-linear” and nested system of feedback loops between actors engaged in complementary activities and motivated by a range of different interests. In this context, the competitiveness of bio-knowledge-intensive areas is clearly related to the ability to generate new ideas and use them to innovate. In a globalized and competitive world, however, capability endowments have to be continuously renewed, raising the demand for interactive learning, networking, foresighting, and the mobilization of complementary knowledges to respond to new challenges and opportunities. The literature on innovation systems explains that the emergence, deployment and transformation over time of dynamic capabilities are the result of an historic and context-dependent process.

At the Interfaces of Governance and Competence Perspectives: Discussing Organizational Choices in the Scottish Biotechnology Cluster1

Abstract This paper focuses on the desirability of different modes of governance in the context of the Scottish biotechnology cluster. The objective is to design theoretical models able to predict organizational choices made by firms seeking access to key complementary assets. Inspiration is drawn from two distinct streams of research: transaction cost economics and the competence perspective. The procedure adopted replicates the static and comparative approach used in several empirical investigations by transaction cost economics. However, as in a competence perspective, ‘strategizing’ behaviour is taken into account. The data needed to run econometric analysis have been collected via mail surveys based on the completion of a questionnaire. Valid responses were provided by 31.2% of an original sample that was composed of a range of organizations including dedicated biotechnology firms, equipment and service providers, clinical research organizations, etc. Empirical results show that both transaction cost and competence-related consideration help explain the selection of specific governance modes. However, Scottish biotechnology companies seem to be predominantly concerned with enhancing existing competences.

A sociological economy of HIV/AIDS vaccine partnerships: case studies from Africa and India

Public–private partnerships (PPPs) are perhaps the key emergent theme in the delivery of what the socio-economic literature terms global public goods. In light of the problems relating to the distribution of health services and products in developing countries, partnerships between public and private institutions are often proposed as an innovative mechanism to reconnect and reorient supply and demand. In this area, the International Aids Vaccine Initiative (IAVI), which is driving the development of candidate HIV/AIDS vaccines through injections of capital into the research process, represents a significant case study. IAVI seeks to form partnerships between key public and private interests committing them to sharing the risks, costs and benefits of research into an effective and affordable vaccine against HIV. Our empirical work covers partnerships based in several countries including Kenya, Uganda, Rwanda and India. Our early findings highlight IAVIs ability as a learning institution as it adapts its institutional arrangements to various local contexts. An offshoot of this appears to be the building of real local capacity.

Bio-clusters as co-evolutionary developments of technology, venture capital and socio-political institutions: a historical perspective of Cambridge and Scotland

Bio-clusters have been at the centre of regional dynamics in the last ten years. The fact that they allow innovation and competitiveness to emerge through intense interactions between various agents in close geographic proximity has stimulated the interest of policy-makers with aspirations to establish biotechnology presence in their regions. However, this paper conceives bio-clusters as historical developments of the social division of labour which co-evolve with biotechnology, venture capital (VC) and socio-political institutions. In doing so, it focuses on the empirical cases of Cambridge and Scotland, critically taking on board a recently developed industry life cycle model. The argument is that co-evolutionary development of bio-clusters is not static but dynamic, involving, nevertheless, certain pre-conditions, discontinuities and contradictions.

Pursuing a biotechnology system of innovation in Lithuania: a conceptual framework for effective policy intervention

The focus of this paper is on Lithuania, whose government released an ambitious innovation strategy to become an innovative services hub for Northern Europe by 2015, and an innovation hub by 2020. Biotechnology has been identified as a strategic sector, and whether Lithuania will be able to achieve its ambition of a fully functioning biotechnology sectoral system of innovation will be explored. With the Lithuanian government declaring that they will intervene to achieve their innovation goals, this paper argues that sound policy intervention is possible and can be done in a way that avoids the limitations of past systemic approaches. The policy approach presented is based on a modified extended industry life cycle, and the movement of system structures through three phases – background, pre-emergence and emergence – and explains how each phase lays the groundwork for transition to the next phase.

The effect of the dynamics of knowledge base complexity on Schumpeterian patterns of innovation: the upstream petroleum industry: The effect of the dynamics of knowledge base complexity on Schumpeterian patterns of innovation

This article analyses important changes in technological innovation in the upstream petroleum industry. It provides evidence that shifts in sectoral patterns of innovation over the petroleum industry’s lifecycle from the 1970s up to 2005 were dependent on the dynamics of knowledge base complexity, a key dimension of an industry’s technological regime. Accordingly, observed shifts in innovation patterns are understood to be the aggregated strategic response of industry innovators to changes in the technological regime. The article proposes a quantitative method for exploring knowledge base complexity and Schumpeterian patterns of innovation, and interactions between the two at the industry level. As the industry evolved, its knowledge base moved to higher orders of complexity creating a shift in the Schumpeterian pattern of innovation. Increased knowledge base complexity was found to alter Schumpeterian patterns from Mark I towards a ‘modified’ Mark II. Instead of coming predominantly from ‘traditional’ established oil operators, technological innovation was increasingly triggered by a new class of emergent integrated service companies – ‘second tier’ systems integrators of the upstream sector able to cope with increased knowledge base complexity.