Universities also control assets and skills that are to some extent complementary to those of both the NBFs and the large firms (typically, upstream scientific capabilities). As a result, the growth of the industry has hinged upon network-like relationships based upon extensive collaborations and a division of labor between these three types of agents.6


There are a number of different types of external linkages that large firms have used. Following the literature on this topic, one can identify four main types of linkages that large firms have formed with other agents in biotechnology:7 (1) they enter into research and/or joint development agreements with other firms; (2) they form research agreements with universities; (3) they invest in the capital stock of NBFs (minority participation); (4) they acquire NBFs. To a large extent, each of these four strategies enables the firm to gain access to a particular set of tangible or intangible resources necessary for innovation.8

Most agreements signed by large chemical and pharmaceutical producers with other companies tend to be project specific. These agreements, usually with NBFs, focus on "downstream" activities of the innovation cycle. They are aimed at developing and commercializing a particular discovery of the NBF (e.g., the synthesis of a new enzyme or hormone or growth factor) in the areas of specialty chemicals, agricultural biotechnology and, above all, pharmaceuticals.

The agreements with universities tend to focus on more basic research objectives. Large firms finance research activities performed by academic laboratories to acquire, by interacting with university scientists, some familiarity with the basic knowledge in this field. Such agreements, between large firms and universities, are important sources of recruiting qualified scientists and researchers, and also serve as a means by which firms can engage the services of top researchers while these researchers continue to work in environments they find most congenial.9 Other than these general and "intangible" gains, the agreements with universities


Clearly, there is some overlap between the skills, competencies, and activities of universities, NBFs, and large firms. Many large corporations perform in-house basic and applied research. Universities often perform a good deal of applied research. Many NBFs have in-house basic research skills, and a few others now possess downstream capabilities. Nonetheless, our schematic distinction has an important element of truth and serves well as a first approximation. We shall return below to a fuller discussion of the nature of these comparative advantages.


See, for instance, Daly (1985), Kenney (1986), Office of Technology Assessment (1984), and Pisano et al. (1988).


The following discussion on the different forms of external linkages of the large firms in biotechnology draws upon Arora and Gambardella (1990).


Kenney (1986) suggests that a "preferential access" to trained manpower is an important reason for university–corporate linkages in biotechnology.

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