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ID Number: 10086908 BMAN31811
Discuss the Technological Issues and
Organisational Challenges of Firms in the
Biotechnology Sector
Introduction
Biotechnology represents a type of technology based on biology; it describes the moment
when researchers apply micro-organisms, animal and plant genetics into products.
Biotechnologies generate many expectations to the extent it aims to improve life and planet
by reducing environmental footprint or manufacturing healthcare product. These expectations
make biotechnology an emerging sector. It is composed of firms developing these biological
substances meant to the discovery of new medicines and diagnostic tools development. Most
of these firms’ revenues come from the sell or the license of these medicines. They can
operate independently or, most of time, profit from external knowledge through alliances and
geographical clusters. Agriculture and health care are the most affected sectors as it has a
wide impact; it comes to tackle real concerns or strive to save lives. However, due to its large
scope of action and the stake of its impacts for society, the biotech sector has changed and is
now facing important challenges.
The change of the biotech sector has been initially mainly driven by innovation and
globalization. Regarding agriculture, biotech has improved both quantities and qualities of
food productions, a crucial modern challenge, especially in developing and emerging

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countries. Competition brought by innovation has led firms to gather themselves through
collaborations and geographical clusters. However, this means of operating has created
monopolies and raised the entry barriers (New Scientist Job, 2016). Monopolies have allowed
companies to protect themselves from new comers but have also given power to a restricted
number of firms. Nevertheless, those monopolies are still meant to expand progress and
globalization gets it difficult for firms to compete differently. Globalization has actually
brought changes to science and technology related to industries by globalizing many
innovations around the world (Malinowski, 1996). Firms and industries are outsourcing their
production by opening offices abroad in order to compete at the international scale. Regarding
firms, settling down a part of their production in foreign countries allows them to reduce
some financial costs and profiting from foreign knowledge. In that way innovations can have
a wider impact on people. More than 13.3 millions of farmers are now using agricultural
biotechnology to increase yields (Pinstrup-Anderson et al, 2000). However, even if this
process admittedly enables firms to compete internationally, some firms struggle with cultural
differences. This paper aims to wonder about the composition of the current technological
issues met by the sector and their potential implications on firm’s organization. How can
technological challenges slow down biotechnology in its progress? Does its research is
always considered as a progress? In which extent have these technological obstacles and risks
affected the firms’ organization? This paper will address the modern technological challenges
faced by firms before trying to understand how firms dealt with their organisational stakes
through collaborations and network theories. The discussion will address a broad view of
biotechnology analysing impacts on agriculture and pharmaceutical sector.

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Technological issues: Firms End Up Stuck Between Financial Issues Emphasized by
Uncertainty and External Concerns
Despite of innovation and outsourcing allowed by globalization, firms are facing significant
financial costs especially affected by an important uncertainty, which affects their
technological capacity. Firms need to invest important amounts of money to get a final
operational product due the different stages of the production process that remain very
expensive and take time. One product may be composed of several components whose cost is
mainly due to their scarcity and the workforce cost. Indeed, assembling these components
requires a specific knowledge owned by high-skilled workers who will work on it during
years. Today the cost of bringing the new successful drug to the market can range from $800
million and $1.7 billion (Hopkins et al., 2007). The cost issue is even more important that it is
based on a great uncertainty. Firms don’t have a clear vision of their final product and may
get any successful product after years of development. The first biotechnology product
approved for human health care was synthetic human insulin, which has been developed
through the 1960s and 1970s and finally approved for pharmaceutical use in 1982 (Hopkins et
al., 2007). Almost 30 years separate the development of the product and its final
commercialisation. Consequently, biotech firms are additionally suffering from an important
irregularity regarding investments from companies. Actually, biotechnology is considered as
“one of the strangest, scariest, sexiest and most interesting corners of the stock market”
(Investopedia.com); its uncertainty makes people trust and invest in a product that might
never born. It is highly recommended to firms to make the most of their investments by using
carefully as every dollar matters.

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Once firms got successful and operational products, they may face other external issues: the
products might counter ethics or the environment protection and become controversial.
Biotechnology is focusing on drugs development and clinical research that aim at treating
disease and medical conditions but some research are now blamed for going beyond morality.
One of the biggest projects under development is the Human Genome Project, which aims to
“decode” the human genome (Anon, 2002). Firms have discovered new genes that could
provide tools to generate and validate targets for a new generation of drugs (Hopkins et al,
2007) and provide health care benefits (Anon, 2002). However, modifying the human genome
boils down to change the nature of the human being, which can be ethically questionable. As
there is not a real definition for each biotechnological fieldwork, firms have thus to be careful
with their research. Furthermore, the biotech sector is confronted to scarcity of resources and
environmental norms that jeopardize some innovations. According to UNCTAD, genetically
modified crops at least provide a solution to the problem of feeding the growing population
by drastically reducing waste and increasing production. However, there can be potentially
harmful. In the USA, some genetically modified crops would have caused “a 90% reduction
in populations of the Monarch butterfly” (GeneWatch, 2015). These environmentally
unfriendly innovations combined to resources depletion slow down the technological capacity
of firms and so the commercialisation of industrial biotechnologies. It might be recommended
to firms to be more eco-friendly as negative environmental spillovers can affected the
biotechnology sector as aforementioned. Firms must take into account ethics but should be
dragged down by it due to there is not a clear definition of what is ethical or not for all type of
research. Therefore, these financial risks and external impacts related to ethics and the
environment have led firms to rethink their organization and their way of operating.

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Organizational Challenges: A Balance Between Research Protection And External
Knowledge Opportunities
Before such financial risks and impacts from external events, firms display two behaviours:
they protect their research with patents and licenses and work together through collaborations.
Patents allow firms to protect the intellectual property of their research for a fixed period of
time and avoid copying from competitors. Approximately 8000 patents were registered in
2000 against 21,500 three years later (Hopkins et al., 2007). Innovating organisations argue
that without the limited monopoly rights to profit from their new products and processes that
are conferred by intellectual property tights, there is no incentive to invest in research and
development. Nevertheless, the main advantages of patents represented by innovation
protection constitute its main downsides. It makes ideas or knowledge inoperable for other
firms by preventing copying and duplication whereas some firms or developing countries
have succeeded by copying. Many of patents initiated in the pharmaceutical sector in the
1970s are expiring, which gives way to the development of generic medicines. Unlike patents,
license is a type of contract where a firm sells or leases a certain legally protected knowledge
or entity to another firm. It allows some biotech firms to earn money on it and other firms to
buy a specific knowledge. Biotech licensing has significantly increased over the past few
years and firms tend to rely heavily on licensing as a source of innovative science, especially
regarding research: a 43% of licensing deals in 2013 concerned research against a 30% in
2011 (Life Science Nation - Next Phase, 2016). Some of licenses can encourage innovation;
free licenses allow firms to access knowledge but also to bring it changes. However, it gives a
price of the access to knowledge that some firms or countries cannot afford and it may
decelerate innovation if firms just settle to buy licenses instead of investing in R&D. That is
why it is recommended to firms to manage carefully their intellectual property protection: a

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protected knowledge is a valuable knowledge but a too great protection could slow down
global innovation process and scare other biotech firms, which may negatively impact
collaboration process.
Surprisingly, biotech firms are rethinking their way of operating by collaborating with other
firms through alliances and open innovation. In a world where science is initially opposed to
business (Pisano, 2006), a certain convergence is observed: doing business to improve
science. Alliances mainly represent formal relationships and their potential value reached
$55.4 billion between 2014 and 2015 (EY, Biotech deals, 2016). Pharmaceutical and
biotechnological firms are driven mutual recognition that some objectives can be achieved by
the combination of resources and that the joint outcome will provide a positive benefit that
exceeds what might be achieved independently. The human therapeutics company Amgen is a
relevant example of alliance. The firm got an extensive R&D collaboration with small biotech
companies whose relationships work on a labour division where the smallest firms are mean
to develop promising technology with Amgen’s financial and scientific resources, and Amgen
will maybe commercialise it (Powell, 1998). Firms can share knowledge and risks and so
getting a higher productivity and less uncertainty. However, this centralization of knowledge
increases the risk of monopolies and creates a dependency between firms. In Amgen case,
companies can work more efficiently by allocating the stages of production process but they
can end up locked into a single competence: “workers” or “decision-makers”. That is why it is
recommended to firms to make relevant and durable alliances. In addition to secure alliances,
firms can collaborate through open innovation. Open innovation can be defined as “a
paradigm that assumes that firms can and should use external ideas as well as internal ideas,
and internal and external paths to market, as the firms look to advance their technology”
(Chesbourgh et al. 2006, p.1). Open innovation can be implemented in research between

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small biotech firms and universities. Management schools are highly active in research and
often ranked regarding it. Establishing partnerships with companies enables them to take
advantage of their reputation and enable these companies to enjoy free additional research in
their field. The concept can also be implemented in development with the collaboration of
SMEs and pharmaceutical firms. Open innovation allows firms to exchange their knowledge,
database, skills and resources but it mainly enables firms to share R&D knowledge exploiting
new emerging technological opportunities (Powell, 1998). Through this process, firms access
a broader database, so their innovative capacity is drastically improved, which avoids a kind
of fierce competition and then creates a smarter and quality-oriented innovation. Another
positive spillover is related to network share. Firms share their clientele and contacts involved
in the production process (customers but also providers, distributors) and create a portfolio of
ties to specific partners for certain activities (Powell, 1998), which is a good way to better
target their market research. However, given its broad scope of action, it is possible to find
open innovation in all sectors, which increases the complexity of innovation. Cohen and
Levinthal (1990) argue that the ability of firms to recognize the value of an external
knowledge and then exploit this knowledge in an effective way deeply depends on their
innovative capacities. Firms must then develop dynamic capacities (Teece et Al, 1997) to
adapt to new processes and learn from competitors in this complex environment. They must
be able to share knowledge without revealing information that might be a threat to their
competitive advantage.

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Conclusion
1.1. Overall Conclusion
The biotechnology sector is facing substantial issues affected by the financial cost necessary
to develop a product. The financial risks are explained by the high cost of the production
process and the uncertainty of getting an operational product. In addition, as a consequence to
live in a globalized world in permanent evolution, firms have to face new obstacles involving
the environment and ethics. Resources scarcity and new environmental norms set up by
governments and recent scandals involving the biotech sector integrity in terms of ethics are
slowing down firms’ innovation. These challenges have deeply transformed the firms’ way of
operation now defined by intellectual property rights and collaborations. It has to be
recognized the improvements made by biotechnology in daily life, especially in the health
sector, even if the commercialization of industrial biotechnology is not as fast as the common
belief. The different ways to protect researches are modernizing and it is interesting to see
firms opening themselves and using their competitors as a way to thrive.
1.2. Trends and Predictions
The influence of globalization is likely to modify the biotech landscape in the future; new
type of alliances or ways of working will emerge. The patents issue is likely to become an
even more important obstacle to innovation in the future; that’s why we might wonder about
the potential actions of governments to reform. Regarding the global labour market and the
current situation of the world resources, the most important challenges for firms will remain
the learning process and the environmental issue. Learning from the others and adapting

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depends on the ability of firms to develop dynamic capabilities in a globalized world. The
increasing scarcity of the earth resources is also a crucial issue that will definitely impact the
biotechnology sector over the long term. The ethical concern isn’t an issue of prime concern
to the extent that society is getting open-minded day after day; scientific progress is likely to
overcome potential new ethical challenges.
Word count: 2,737 words

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