Sunday, November 28, 2010


A Biotech cluster is a region, which is concentrated with interconnected businesses, suppliers and affiliated institutions in the biotech field.

In other industries, business clusters start with a large company, which attracts suppliers into the region. Technology entrepreneurs spin off from the large company and form smaller new companies. These new companies in turn attract venture capital and management talent, which help in the formation of more companies. The formation of biotech clusters on the other hand is way different from the traditional formation of business clusters. Discovery research in Universities as well as funding from NIH gives rise to intellectual property. This IP attracts biotech entrepreneurs to the region who develop the core technology and identify potential products. This in turn attracts venture capital and other investments. These start up companies form strategic alliances with big pharmaceutical companies for product development, marketing and distribution. Hence these clusters become hubs of activity with rapid entry and exit of organizations and individuals.

Governments in different countries are realizing the potential of Biotechnology to create new industries and are keen to develop and commercialize new discoveries in this field. However some countries like Japan and Germany where the governments are spending billions of dollars to create a biotech business clusters, have been unsuccessful. On the other hand UK and US have managed to develop successful biotech clusters. Even in the US regions like LA, Chicago, New York City have been unsuccessful in creating biotech clusters even though these regions have strong research universities, access to venture capital and favorable government policies.

Source: Meldman, M. and E. Romanelli, “Organizational Legacy and Internal Dynamics of Clusters”, working paper, University of Toronto, 2006

Analysts believe that what's missing in these regions is a rich social network to promote innovation. Such a network connects scientists, entrepreneurs, managers, venter capitalists and organizations, which allow the quick flow of information within and across different companies. Thus companies have easy access to a deep labor pool of scientists as well as managers and investors, which improves the efficiency of the industry. Moreover, biotech is a very risky field where the chances of loosing a job or a business running on loss are relatively high. In such cases social networks also provide job opportunities to a vast number of people.

Experts in the industry believe that ‘location’ has a strong influence on the prosperity of a Biotech start up company. Many experienced biotech executives and investors believe that start-ups should be located near a biotech cluster region. This would allow the involvement of experienced professionals and investors, thus enabling active collaborations and dialog. These are steps that are essential in taking the start up company to the next level.

However as the biotech industry grows, it remains to be seen whether the benefits of social networking in clusters outweigh the challenges of IP infringement and stiff competition within these clusters.


Creating successful Biotech Clusters.

1 comment:

  1. Creating Biotech clusters seems to be a great idea but it always depends on where the clusters will be initiated. If established in a foreign country, the rules and regulations have to be considered and followed accordingly. In some countries for instance, all the drugs require prescription only, where else here in the US some of them can be obtained over the counter. With that said, Biotech clusters would not work in some developed countries so easily. Even pharmaceutical companies in the US spend a lot of money in advertising to market their products, which I think is still very costly to remain in business, not to mention the law suit settlements.