ScanBalt Competence Region:

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ScanBalt Competence Region:

Creating Value between Biotech Clusters

Christian HM Ketels, PhD Institute for Strategy and Competitiveness , Harvard Business School Center for Strategy and Competitiveness, Stockholm School of Economics

ScanBalt Forum 2005 Oslo, Norway 3 November 2005

This presentation has benefited from Professor Michael E. Porter’s articles and books and ongoing research at the Institute for Strategy and Competitiveness and joint work with Professor Örjan Sölvell at the Center for Strategy and Competitiveness, Stockholm School of Economics.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means - electronic, mechanical, photocopying, recording, or otherwise - without the permission of the author

Additional information on the Institute for Strategy and Competitiveness is available at www.isc.hbs.edu Additional information on the Center for Strategy and Competitiveness is available at www.sse.edu/csc

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ScanBalt Competence Region:

Creating Value between Biotech Clusters

• Do clusters still matter in a globalizing economy and research community?

• What is the role for cooperation across life sciences clusters in a cross-national region?

• A look ahead: Issues on the horizon for cluster-development

efforts in the life sciences

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Clusters are an increasingly important feature of the global economy

Globalization and Regional Clusters

The context for competition between locations is changing

• More locations meet the minimum conditions to become potential

sites for economic activity

• More locations reach a high level of growth, making them attractive

markets

to serve

...and thus the relationship between locations

• More competiton

• More specialization and regional

concentration

• More linkages

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The Economic Geography of Life Sciences

Drivers of Change

• There is an increasing number of locations vying for life science activities, often with significant government involvement

• Factors related to geographic proximity, e.g. knowledge spillovers and access to a shared skill pool, are critical in the life sciences

• Industry consolidation and the use of acquisitions to add innovative capacity increase international linkages

• Location is becoming increasingly important for life science companies and research institution

• Locational patterns in the industry are in flux with the number of

significant future life science hubs far smaller than the number of

locations currently competing

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New Model of Innovation

Old “silo”-model

Old “silo”-model New “

New New “open”-model

“openopen””--modelmodel

• Sequential process

• Basic research conducted in universities

• Knowledge transfer through licensing

• Product development in big Pharma

• Product launch and marketing by big Pharma companies

• Sequential process

• Basic research conducted in universities

• Knowledge transfer through licensing

• Product development in big Pharma

• Parallel process

• Basic research conducted in universities and biotech

companies

• Knowledge transfer through licensing and acquisition

• Product development in big Pharma and specialist biotech companies

• Parallel process

• Basic research conducted in universities and biotech

companies

• Knowledge transfer through licensing and acquisition

• Product development in big Pharma and specialist biotech companies

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0%

2%

4%

6%

8%

10%

12%

14%

-5% -3% -1% 1% 3% 5% 7% 9%

Source: International Cluster Competitiveness Project, Institute for Strategy and Competitiveness, Harvard Business School

World Market Share, 2002

Change in World Market Share, 1997 - 2002

A Crowded Field

World Export Market Shares in Biopharmaceuticals

Sweden

Belgium Germany

Switzerland

USA France

Ireland UK

Italy ROW

Netherlands

Denmark

Spain

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Co-operation Across Cluster Initiatives

• Activities with substantial economies of scale

– Marketing the region, including FDI attraction

– Lobbying politicians and public sector officials – Financing large research facilities

– Creating specialized markets for IP and equity

• Activities to leverage similarities across cluster

• Activities to leverage differences across clusters

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Generation of Solid Data on Clusters

Biopharmaceuticals and Medical Devices Employment

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000

Schleswig-H olstein

Stockho lm Hamburg

Syds verige Etelä-Suomi

Västsverige Östra Me

llansverige

Zachodniopom orskie

Latvija Lietuva

Oslo og Akershus Pomors

kie

Mecklenburg-Vorpommern Sør-Østlandet

Övre No rrland

Agder og Rogaland Småland med öarn

a

Wa

rminsko-M azurskie

Islands Eesti

Norra Me llansv

erige

Länsi-Suomi Hedm

ark og Oppland Me

llersta No rrla

nd

Vestlandet Trøndelag

Nord-Norge Itä-Suomi Pohjois-Suomi

A hve

nanma a

Note: Data set does not include Denmark and Russia

Source: Institute for Strategy and Competitiveness, author’s analysis.

Employment, 2002

Medical devices Biopharmaceuticals

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Generation of Solid Data on Clusters

Export Specialization Patterns

0%

20%

40%

60%

80%

100%

For est Prod

ucts

Medical Devices Fishing P

roduc ts

Fur niture

Telecom Equip.

Ma

rine Equipm ent

Biophar maceut

icals

Processed Food

Apparel

Other Iceland Russia Latvia Estonia Poland Lithuania Germany Denmark Finland Norway Sweden

Share of BSR exports, 2002

Source: WTO (2005), Institute for Strategy and Competitiveness, author’s analysis.

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Co-operation Across Cluster Initiatives

• Activities with substantial economies of scale

• Activities to leverage similarities across cluster

– Learning from each other about cluster development activities – Providing a neutral assessment of clusters and cluster policies

• Activities to leverage differences across clusters

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Tracking the Impact of Cluster Policies

The Cluster Competitiveness Report

More information at www.clustercompetitiveness.org

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Co-operation Across Cluster Initiatives

• Activities with substantial economies of scale

• Activities to leverage similarities across cluster

• Activities to leverage differences across clusters

– Increase the bandwidth of value provided in the region by linking the specific skills of heterogeneous regional clusters

– Create a bridge to strong but isolated research capabilities

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Strategic Positioning of Life Science Clusters

United States

NY

PA

NC VA WV

FL GA

SC

AL TN IL OH

IA

IN

AR

LA MS

TX ND

OK CA

AZ NV

WY MT

ID

NM CO OR

UT

KS SD

NE

MN

WI

MO WA

MI

KY

ME

MI VT NH

MA

CTRI

Note: All 318 Metropolitan Areas are shown as shaded; includes subclusters in which the MA has employment rank 1 or 2 nationally, 1999 data Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School

Boston, MA

Research Organizations 7%

Medical Equipment 12%

Boston, MA

Chicago, IL

Diagnostic Substances 42%

Chicago, IL

Diagnostic Substances 42%

Washington, D.C.

Los Angeles, CA

Health/Beauty Products 11%

Los Angeles, CA

Health/Beauty Products 11%

Middlesex – Somerset, NJ Health/Beauty Products 9%

Minneapolis, St. Paul, MN Surgical Instruments 6%

Newark, NJ

Pharmaceutical Products 12%

Newark, NJ

Oakland, CA

Biological Products 14%

Oakland, CA

Biological Products 14%

Philadelphia, PA

Research Production

Devices and Substances

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Co-operation Across Cluster Initiatives

• Activities with substantial economies of scale

• Activities to leverage similarities across cluster

• Activities to leverage differences across clusters

• The impact of cross-cluster cooperation crucially depends on the strength of the individual cluster efforts

– Cooperation across the region is no substitute for lacking activities

on the cluster level

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Issues on the Horizon

• Economic policy for the new innovation model – taking entrepreneurship seriously

• Balance of basic and applied research in publicly-funded institutions

• Management of conflicts of interest among companies, individual researchers, and publicly-funded institutions

• Health care policy as the key driver of volume and quality of demand for life sciences products

• ScanBalt is well placed to be the central venue for discussing and addressing these type of issues

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Further Information

• Institute for Strategy and Competitiveness (www.isc.hbs.edu)

– Extensive material and presentations on competitiveness and clusters – Data on US clusters, including biopharmaceuticals and medical devices – Data on global export patterns by cluster (to be launched)

• Center for Strategy and Competitiveness, SSE (www.sse.edu/csc)

– Research on Nordic clusters and cluster policy

• Ivory Tower/Cluster Research (www.cluster-research.org)

– Data on Swedish clusters , including biopharmaceuticals and medical devices

– Data on cluster initiatives worldwide

• The Competitiveness Institute (www.competitiveness.org)

– Global network of cluster practitioners