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Diagnosing the Growing Pains of a Technology-Based Industry. An Examination of the Finnish Biotechnology Industry in Light of Empirical Economics

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  • Tahvanainen, Antti-Jussi

Abstract

Positioned in the context of the technology-based industrial emergence literature, this dissertation identifies and examines organizational, managerial, and institutional challenges that small and medium sized Finnish biotechnology companies have encountered during the emergence of the field as an industry. Based on the results, central Implications for research, management and policy are suggested. The five separate studies that constitute this dissertation fill specific, clearly demarcated gaps in the underlying literature that have not been explicitly scrutinized in extant works. The contributions are made in three domains that are central to the emergence of technology-based industries: In the academic domain the dissertation brings forth new knowledge on bridging the gaps between academia and industry in university-industry technology transfer (UITT) that has previously been found to be riddled with challenges. The dissertation adds to the understanding on the role and value of organizational practices performed by universities and their respective technology transfer offices (TTO) to overcome the challenges and to bring forth university inventions to industrial and societal use. TTOs are found to lower the threshold of UITT stakeholders to participate in and sustain the process of UITT, to facilitate congruence between the features of scientific discoveries and specific market needs, and to mitigate the detrimental effects that opportunistic incentive structures of diverse stakeholders can have on UITT. In the business domain, the dissertation establishes that academia-based start-ups are at a relative disadvantage regarding their capabilities to attract financing, recruit skilled labor, and design viable business strategies – mostly due to a lack of business-related skills, experience and vision as well as an enchaining bond to academic culture, principles and incentives. Young, high-quality firms are also found to suffer most severely from information asymmetry related problems, because they often have nothing tangible to show for their actual quality and cannot distinguish themselves from so-called lemons. Hence, their capital is under-valued on financial markets. Finally, contributing in the public policy domain the dissertation reveals that strategically weak governmental funding can have two disadvantageous externalities: First, due to information-asymmetry-related difficulties in differentiating between high-quality companies and lemons, risk capital instruments in particular tend to support only the latter type of companies, as high-quality companies refrain from applying for such funding in the first place. And second, governmental funding instruments that do not factor in the compatibility of the business models, contents and embeddedness of funding recipients with their respective regional industry structure tend to artificially ventilate businesses that would not otherwise be viable in these specific regions.

Suggested Citation

  • Tahvanainen, Antti-Jussi, . "Diagnosing the Growing Pains of a Technology-Based Industry. An Examination of the Finnish Biotechnology Industry in Light of Empirical Economics," ETLA A, The Research Institute of the Finnish Economy, number 47, 01-2015.
  • Handle: RePEc:rif:abooks:47
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    References listed on IDEAS

    as
    1. Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," The Quarterly Journal of Economics, Oxford University Press, vol. 110(4), pages 857-880.
    2. Gilles Duranton & Diego Puga, 2001. "Nursery Cities: Urban Diversity, Process Innovation, and the Life Cycle of Products," American Economic Review, American Economic Association, vol. 91(5), pages 1454-1477, December.
    3. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    4. Brezis, Elise S & Krugman, Paul R, 1997. "Technology and the Life Cycle of Cities," Journal of Economic Growth, Springer, vol. 2(4), pages 369-383, December.
    5. H. Hanson, Gordon, 2005. "Market potential, increasing returns and geographic concentration," Journal of International Economics, Elsevier, vol. 67(1), pages 1-24, September.
    6. Krugman, Paul & Venables, Anthony J., 1996. "Integration, specialization, and adjustment," European Economic Review, Elsevier, vol. 40(3-5), pages 959-967, April.
    7. Furman, Jeffrey L. & Porter, Michael E. & Stern, Scott, 2002. "The determinants of national innovative capacity," Research Policy, Elsevier, vol. 31(6), pages 899-933, August.
    8. repec:hhs:iuiwop:430 is not listed on IDEAS
    9. Rikard Forslid & Ian Wooton, 2003. "Comparative Advantage and the Location of Production," Review of International Economics, Wiley Blackwell, vol. 11(4), pages 588-603, September.
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