research@hec - Issue #7 - (Page III)

Profitable? Are Biotechs Key ideas When Rodolphe Durand returned to France after two years of research and teaching in the United States, he chose to focus his research on industries where intellectual capital and creativity matter (business schools, French “haute cuisine” and industrial design). By choosing to study biotechnology companies using a sociological approach, Rodolphe Durand, Olga Bruyaka and Vincent Mangematin demonstrate in their article that the American model cannot be transposed to the French biotechnology sector. They highlight three specific strategic dilemmas faced by companies wishing to transform their revenue potential into real profit: • the specialization and diversity of the fields; • the decision to form or not to form a strategic alliance; • the decision to focus on research or the supplying of services to actors actively involved in research. short-term profits. indiscriminately applied to French biotechnology firms. • The “Silicon Valley” model of American development is not applicable when • The strategic orientations of biotechs (business models, the choice of being involved in strategic alliances and the desire to diversify into multiple fields) have different effects on their capacity to generate profit-making assets and then appropriate these M FRENCH BIOTECHS AND THE AMERICAN MODEL The most commonly cited development model in the biotech industry is that of the American clusters, such as Silicon Valley: firms involved in active research, i.e., engaged in the competition for patents and publication of their findings, financed by venture capital and then introduced on to the stock market. Although this model works very well in the United States, the same formula cannot be applied to the European biotechnology sector: the legal, institutional and economic contexts are not the same. For example, the biotechnology sector in France remains very limited and is comprised of few listed companies. Because of their size, they cannot create many jobs, and even partnerships with other biotechs (and especially with partners, i.e. major corporations in the pharmaceutical industry) in competitiveness clusters do not enable them to grow sufficiently. Consequently, the American model of development cannot be applied to France. However, some French biotechs that have their own development models function perfectly well. This is especially true for small biotechs that provide services to large laboratories. “RENT GENERATION” AND “RENT APPROPRIATION” For biotechnology companies, patents and the publication of articles in scientific reviews* are strategic resources that signal rent potential. In order for the company to be profitable, however, it must be able to appropriate rent from its findings and generate income from them. Yet, patenting is costly, and a good patent often does not generate much of revenue for the company applying for it. Setting up a development model is therefore very complex, because factors such as the company’s strategic orientation, its choice of partnerships with major players in the industry and the diversification of its fields of activity do not have the same influence on rent generation and appropriation. BIOGRAPHY Rodolphe Durand holds a PhD in Corporate Strategy (HEC Paris) and a Masters in Philosophy. He is a professor in the Strategy and Business Policy Department at HEC Paris, where he is in charge of the MBA and PhD specialization in strategy. His primary research interests concern growth strategies, analyzing competitive advantage, and the links between companies’ strategic decisions and the socio-cultural evolution of industries. February - March • research@hec III

Table of Contents for the Digital Edition of research@hec - Issue #7

Cover & Table of contents
Business and Research: why Collaborate?
Are Biotechs Profitable?
An Initial Evaluation of the Better Regulation Initiative
The Impact of Religions on Risk-Taking in United States

research@hec - Issue #7