The Determinants of Commercialization Strategy in UK and Germany
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Transcript of The Determinants of Commercialization Strategy in UK and Germany
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The Determinants of Commercialization Strategy:
Idiosyncrasies in British and German Biotechnology
Carolin Haeussler
Ludwig-Maximilians-Universitt Mnchen
Institute for Innovation Research, Technology Management and
Entrepreneurship
forthcoming: Entrepreneurship Theory and Practice
Abstract
The intention of this paper is to investigate whether market-related factors have a stronger influence on
the strategic decision-making of ventures in liberal market economies than on that of their
counterparts in coordinated economies. Thereby, we focus on a particularly important strategic
decision that firms face the commercialization choice. Using a unique survey dataset on the
commercialization of British and German biotechnology firms, we analyze the determinants of
commercialization strategy, paying particular attention to national idiosyncrasies. Together, the
findings indicate that the commercialization strategy follows distinct patterns in the British liberal
market economy and the German coordinated economy.
Keywords: commercialization strategy; institutional theory; country comparison
JEL Classification: M13, L24, O32, O34
Acknowledgements
I like to thank Joachim Grammig, Marc Gruber, Dietmar Harhoff, Holger Patzelt and two
anonymous reviewers for valuable comments on an earlier version of this paper. Financialsupport from the German Research Foundation (SFB TR 15) and from the Munich Center of
Health Sciences is gratefully acknowledged.
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Introduction
The institutional perspective emphasizes the impact of the systems that surround organizations and
shape their processes and decision-making (Scott, 2001). Institutions provide formal and informal
rules of the game that guide the behavior of human actors and organizations (North, 1990). Part of the
explanatory power of institutions is due to the belief that institutional factors affect strategic decisions
of companies (Hoskisson, Eden, Lau, & Wright, 2000; Scott, 2001; Hitt, Ahlstrom, Dacin, Levitas, &
Svobodina, 2004). Given the heterogeneity of national institutional settings, there is a need to shed
light on inter-country differences in companies strategic decisions. Previous studies have examined
the effect of various institutional environments on strategic choices. Researchers analyzed, for
example, the strategic actions in different institutional settings such as R&D specialization (e.g.,
Casper, 2000), selection of alliance partners (Hitt, Ahlstrom, Dacin, Levitas, & Svobodina, 2004),
diversification (Kogut, Walker, & Anand, 2002), internationalization (Coeurderoy & Murray, 2008),
foreign direct investment and ownership levels (Delios & Henisz, 2000) and venture capital financing
(Bruton & Ahlstrom, 2003; Ahlstrom & Bruton, 2006; Zacharakis, McMullen, & Shepherd, 2007).
These studies found country-specific patterns that have been attributed to institutional differences.
One important but under-investigated aspect where national institutional frameworks differ is
in their market orientation. The varieties of capitalism perspective differentiates between two major
alternative economies which vary in their market orientation, the liberal market economy and the
coordinated economy (e.g., Whitley, 1999; Hall & Soskice, 2001). The intention of this paper is to
investigate whether companies that make strategic decisions in more market-based economies put
greater weight on market-related criteria than companies operating in coordinated economies.
An important strategic choice that companies in all countries have to make is how to
commercialize technology. The dramatic increase in licensing in the last two decades questioned the
paradigm of the fully integrated firm. Companies have to calculate whether they are likely to make
more profit by introducing a technology into the market on their own or by entering cooperative
commercialization agreements (Teece, 1998; Gans, Hsu, & Stern, 2002). In the rest of the paper, we
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shall refer to the choice that companies make between cooperative and independent commercialization
as the commercialization choice. In particular, entrepreneurial firms often show strong invention
capabilities but encounter difficulties in successfully commercializing their technology. Rosenberg,
Landau, & Mowery (1992) argue that the efficacy with which innovations are utilized in the economy
is a key variable affecting the rate of economic growth. The OECD (2005a) corroborates this
argument, and bemoans the fact that firms in several OECD countries lag behind US firms in their
ability to commercialize national biotechnology efforts.
This study contrasts the commercialization choice of biotechnology firms in two European
countries, the United Kingdom and Germany. After the US, these two countries accommodate the
largest number of biotechnology firms but provide very different ecosystems. We suggest that the
British economy is organized around liberal market institutions that are supposed to accommodate
market-oriented decision-making more readily, while the highly regulated and predominantly
coordinated German economy is expected to decrease the importance of market-related criteria in
companies decision making.
We analyze the strategic choice of commercialization of 151 German and 95 British
biotechnology firms and test whether the two market-related determinants mentioned in the literature
by Teece (1998) and Gans et al. (2002), i.e., the level of IP protection and the difficulty with which
important complementary assets are accessible, influence the companies in the two countries in
different ways. The statistical results imply that even in the high-technology sector, where firms target
international markets and globalization forces are at work, country-specific differences shape the
commercialization choice. We find that British firms rely on market-related criteria to a greater extent
than German firms.
This study makes the following contributions: first, it demonstrates that a firms
commercialization choice determines how much a firm profits from its innovation (Teece, 1998);
understanding a firms decision-making process is at the core of firm strategy. Existing literature has
identified the level of IP protection (Gans et al., 2002), cost-effectiveness (Gans et al., 2002; Aggarwal
& Hsu, 2008) and whether a firm is VC-financed or not (Hsu, 2001; 2006) as determinants of
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technology commercialization strategies. We add the institutional system in which a firm is embedded
to this list. Second, in doing so, we not only emphasize the impact of institutional arrangements on the
type of strategy that is selected, but also investigate the impact of these institutional arrangements on
how the strategy is selected. Here, we add to recent contributions by Hitt et al. (2004) on alliance
partner selection and by Zacharakis et al. (2007) on VC investment decisions. These studies provide
evidence that the importance which firms attach to specific decision criteria varies due to differences
in the institutional framework. Our study reveals that the market orientation of the institutional system
determines how strongly firms take market-related criteria into account when making a decision.
Third, this study extends the varieties-of-capitalism perspective. Whereas proponents of this
perspective have concentrated on how differences in two institutional systems, the liberal market
economy and the coordinated economy, generate different incentives for firms to pursue distinctive
innovation strategies (e.g., Casper, 2000; Whitley, 2002), we show that firms in these systems also
differ as to the weight they put on market-related decision criteria.
The results not only extend the literature, but also have important implications for policy-makers
and practitioners. This paper is a first step towards understanding country-specific patterns in the
selection of commercialization strategies and thus in the development and attractiveness of a market
for ideas. The results of this analysis are relevant to public policy, since only a precise understanding
of the interplay between country-specific patterns and market-related determinants opens up ways for
effective policy-making. With regard to biotechnology ventures, as well as advisors and investors, the
findings point to a particular logic behind the process of selecting a commercialization strategy, which
varies depending on the country in which a firm is based. In particular, they imply that even in the
high-technology sector, where firms target international markets, firms in coordinated economies
pay less attention to market-related factors when making a commercialization choice, compared to
firms in market-based economies.
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Conceptual Framework
Cooperative Commercialization: Literature and Empirical Predictions
Among the first who conceptualized the role of cooperative commercialization for firm strategy, Teece
(1988) presents a framework which identifies market-related factors that determine who profits from
an innovation.1
He highlights the presence of enforceable intellectual property rights, which generates
a new environment for innovation management where the focus is on how to capture value. Teece
(1986) argues that the decision on whether or not to exploit the innovation in-house or via cooperative
commercialization depends on two central elements: (1) the extent to which intellectual property can
effectively be protected and (2) the distribution of complementary assets and the costs of building up
these assets.
IP protection. In a strong appropriability environment with enforceable intellectual property rights, the
innovators gain more from their innovation (Teece, 1986). Property rights can be traded on markets
and reduce the risk of expropriation. This reduction of risk is important, since releasing pre-contract
data may force the innovator to share valuable proprietary information, which makes it more likely
that competitors may discover and copy sensitive research-and-development information. The problem
of information disclosure can be amended when well-defined enforceable patents are available. Using
the incomplete contracting framework (Hart & Moore, 1990), Merges (1999) highlights that in a
strong appropriability environment with precise patents, transaction costs are reduced, which helps
increase technology trading. Empirical studies provide evidence for the importance of IP protection in
supporting cooperative commercialization. Arora & Gambardella (1998) report that there is a well-
functioning market for technology in chemical processes and engineering services. Gans et al. (2002)
find that the probability of cooperation increases with the innovators control over intellectual property
rights. In a recent study, Gans et al. (2008) report that the date of a patent grant raises the probability
of closing a licensing deal.
Access to complementary assets. The distribution of ownership and control over specialized
complementary assets is another determinant of commercialization strategy. When specialized
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complementary assets are controlled by other players, the innovator generally gets a smaller share of
the created value (Teece, 1986). The difficulty of acquiring complementary assets may suppress the
market entry of a product by increasing the attractiveness of technology trading. If specialized assets
are costly to acquire or even owned by the rival, a firm will probably prefer cooperative
commercialization as opposed to in-house expropriation. An effective market for technology trading
supports complementarities between firms and moves away from the long-time dominant paradigm of
integration. In contrast, if the firms capabilities to provide these assets internally are superior to those
of its rivals, the firm will surely favor an integration strategy.
The basic premise of the present paper is that the institutional system in which managers are
embedded impacts the role that IP protection and access to complementary assets play in shaping a
companys commercialization choice. In the following, we first review the literature on institutional
systems and then present our rationale with regard to the commercialization strategies that companies
develop.
Institutional Context and Decision-Making
Institutional Embeddedness and Economic Systems
Uzzi (1997, p. 1) refers to embeddedness as being a puzzle that, once understood, can furnish tools
for explicating not only organizational puzzles but market processes. In each society there are
political, judicial, fiscal and other regulatory norms that shape organizational behavior (Hollingsworth,
2000). Hence, variations in national institutional systems are assumed to affect various processes that
take place in organizations (e.g., North, 1990; Whitley, 2002). The idea that it is possible to study
systems unites two traditions. The first is the view of the embeddedness of economic action, which
was introduced by Granovetter (1985) and inspired a large number of studies (e.g., DiMaggio &
Powell, 1991; Uzzi, 1997). The second is the perspective of distinct institutional frameworks that
coordinate economic action (e.g., Nelson, 1993; Hall & Soskice, 2001). The underlying idea of these
traditions is that distinct predictable and understood structures shaping economic exchange emerge as
responses to societal conditioning (e.g., Redding, 2005). While scholars agree that institutions
matter, the question of how they matter remains to a large extent open (Deeg & Jackson, 2008). In
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this paper, we refer to the country as the context and analyze the influence of country-specific
systems on companies strategic decision-making.
The Liberal Market Economy and the Coordinated Economy
The literature on national systems of innovation (Lundvall, 1992; Nelson, 1993) and the varieties-of-
capitalism perspective (Whitley, 1999; Hall & Soskice, 2001) emphasize the heterogeneity among
institutional arrangements across countries. Economies differ as to the extent to which non-market
institutions, e.g., the government, are involved in the coordination of economic behavior (Scott, 2001).
According to the varieties-of-capitalism perspective, there are two major alternative economies, the
liberal market economy and the coordinated economy (e.g., Whitley, 1999; Hall & Soskice 2001).
Whereas liberal market economies (e.g., the US and the UK) operate along roughly laissez-faire
principles, coordinated economies (e.g., Germany and Japan) are comfortable with non-market (i.e.,
governmental) forms of resource allocation (Luk et al., 2008). Overall, government intervention is
much less common in market economies than in coordinated economies (Hoffmann, 2004; Casper
& van Waarden, 2005). In market economies, there is little coordination of market relationships and,
overall, state intervention in the economy is limited to setting rules that support competition. In
contrast, the states role in coordinated economies is so strong that much of the institutional fabric
retains that influence (Bartholomew, 1997). The main difference between the two economies is the
extent of formal regulation and the importance of non-market institutional structures, which influence
key institutional features: the legal system, labor market, company law and the financial system (e.g.,
Whitley, 1992; Casper 2000, Casper and Waarden, 2005).2
In the following we present differences
between the two types in the orientation of these key institutional features, and relate them to the UK
and Germany, which serve respectively as prototypes of market economies and coordinated
economies.
Legal System
From a regulatory perspective, the two types of economies originate from two quite different
traditions: coordinated economies are closely related to civil law, whereas market economies to
common law. La Porta et al. (1999) argue that English common law sprung from the Parliaments
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efforts to protect the citizenry against the sovereigns power. In contrast, the French and German
systems of civil law developed as means of legitimizing the power of the sovereign as chief architect
of the political and economic life. Thus, there is greater protection of the individuals property rights
in common law than in civil law countries (La Porta et al., 1999), although regulation is much denser
in a coordinated economy.
Labor market
A key distinguishing feature of the market orientation of labor markets is the extent to which
companies share authority with industry associations and unions that coordinate and police market
behavior (Hall & Soskice, 2001). Whereas the coordinated economy is more strongly coordinated by
these non-market institutional structures, the liberal market economy emphasizes individual wage
bargaining, allowing fast employee turnover and mobility. Streek (1997) argues that this results in
lower labor mobility in Germany than in the UK. Since human resource competencies are more long-
term and cannot be shifted quickly, firms in a coordinated economy are limited in their ability to
quickly adapt to changes in the environment.
Company law
Whereas the liberal market economy is shareholder-oriented and has a corporate law that is primarily
enabling in nature, the coordinated economy is stakeholder-oriented and places much stronger legal
constraints on company organization (Casper, 2000). These two models of corporate governance have
important implications for patterns of company organization. The stakeholder system, for example,
constrains unilateral decision-making and promotes consensus-seeking, which in turn limits a firms
adaptiveness to changes in technology and in market conditions. Franks and Mayer (1995) call the
German corporate governance system an insider-controlled and stakeholder-oriented system. While
UK managers are mainly influenced by stock prices and shareholders, stakeholders control managers
decisions in Germany. British firm managers are appointed to deliver shareholder-defined
performance. Non-delivery leads to their replacement. Due to the German law requiring co-
determination at the corporate level, the members of the supervisory board are shareholders, banks,
and labor representatives. This two-tier board system ensures that managers do not merely take the
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interest of shareholders, but also the interest of various stakeholders into account (Sanders & Tuschke,
2007).
Financial system
Furthermore, in a coordinated economy the financial system is bank-dominated, whereas liberal
market economies are based on the principles of the capital market. Even though the German economy
is, for example, about 1.2 times larger than that of the UK in terms of the gross domestic product, its
market capitalization is substantially smaller (Worldbank, 2007). Moreover, ownership and
concentration of control of publicly traded companies differ to a large extent between the two
countries. In Germany, block holding by other big corporations or families occurs frequently and
reveals a network of interlocking participating interests (Schmidt & Tyrell, 2004). In the UK,
institutional shareholders hold most of the voting rights, and firms are more widely held, with a high
proportion of a firms stock in free float. The banking dominance and stakeholder orientation of the
German system directly influence information disclosure. Whereas insiders such as employees, banks
and interlocking shareholders are well informed, overall information availability and disclosure are
quite limited and rather private compared to the UK.
Hypotheses
The routines and logic of the institutional frameworks in market-based and coordinated economies are
a source of both incentives and constraints for companies embedded in either type of system. How
companies perceive such incentives and constraints leads to a specific market logic, which then
influences the decision-making and, thus, country-specific capacities and weaknesses of firms
(Hollingsworth, 2000). Figure 1 presents our proposed relationship between market-related
determinants, the impact of the institutional system and commercial strategy.
[Figure 1 about here]
IP Protection
As outlined above, it is presumed that the strength of IP protection is positively related to the
likelihood of cooperative commercialization being chosen over independent commercialization.
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However, in a coordinated economy, the high regulation and heavy coordination by non-market
institutional structures are expected to downplay the importance of market-related criteria, like patent
protection, in companies decision-making. With regard to IP protection, the features of the legal
system determine the importance of patents for protecting firms advances. Porta et al. (1999) argue
that common-law countries (market-based economies) give owners stronger protection than civil-law
countries (coordinated economies). For patent protection, this implies that enforceable patents
decrease the risk of an invention being disclosed to a potential collaboration partner and enable trading
on markets. In this context, Lemley and Shapiro (2005) emphasize that uncertainty associated with
litigation implies that patent grants are best characterized as probabilistic rights. Germany, for
example, is the most important venue for patent litigation in Europe. Approximately 60% of all
European patent infringement proceedings are dealt with in German courts (von Meibom & Meyer,
2008). Von Meibom and Meyer (2008, p. 29) argue that this is a result of Germanys ongoing efforts
to balance the patentees interest in obtaining a reasonable reward for its invention [] and the
interests of the general public in the free movement of goods. This statement again reflects the strong
coordinative character of the German system, which we argue decreases the power of patents to
support cooperative commercialization agreements. A recent study by CJA (2006) for the European
Commission shows that the costs of litigation in Germany are much higher than in the UK and
therefore insurance for patent litigation would demand a premium cost for the German patent owner
(being more than twice as high as the insurance for a UK patent). Thus, we presume that IP protection
has a stronger effect in a market-based economy than in a coordinated economy:
H1: The strength of IP protection is positively related to the likelihood of firms choosing
cooperative commercialization over independent commercialization. This relation is stronger
among firms in market-based economies (UK) than among firms in coordinated economies
(Germany).
Difficulty in Building Important Complementary Assets
As already mentioned above, the degree of difficulty in building complementary assets internally is
considered to be one of the main factors that determine a companys opting for or against cooperative
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commercialization. We argue that the impact of this factor is stronger when a firm is free to operate
and not restricted in its organizational maneuvers. In a liberal market economy, firms are typically
less restricted in their maneuvers and activities than in a coordinated economy (e.g., Luk et al.,
2008). In the following, we discuss how non-market institutional structures, with regard to the labor
market, company law and the financial system, downplay the accessibility of complementary
resources as a determinant of commercialization strategy.
In a coordinated economy, the labor market is typically restricted due to i) active labor-market
policy programs, ii) legislation for employment protection, iii) the welfare benefits system and vi) a
centralized system of wage bargaining (Redding, 2005). In particular, a coordinated system with wage
bargaining through strong unions and Employment Protection Legislation (EPL) limits employee
turnover and mobility. Thus, firms are often unable to use the mechanisms of hiring and firing in order
to make rapid changes in the areas of scientific and engineering skills, because they are restricted by
legislation, the power of unions and bargaining conventions. In market-based economies, authority
based on labormarket relationships enables managers to coordinate economic activities in more
flexible ways than contractual arrangements do (Whitley, 1999, p. 73), and so in principle improves
their ability to take market-related considerations of capability-building into account. In addition, the
rigid labor markets in coordinated economies motivate employees to acquire skills which are often
primarily useful with relation to a single firm, while flexible labor markets promote the acquisition of
general, non-firm specific qualifications (Herrmann, 2008; Lange, 2009). However, the ability of firms
to assemble externally or internally teams of highly skilled individuals determines significantly the
degree to which they can change the internal build-up or the external acquisition of capabilities, and
the speed with which this is done.
Moreover, company law puts legal constraints on company organization. Whitley (1999, p.
70) points out that the level of authority-sharing with various interest groups determines the extent to
which managerial decision-making is constrained. The strong involvement of workers and various
interest groups in stakeholder-oriented concepts of corporate governance limits the leeway of firm
managers in coordinated economies. This involvement presumably makes managers less responsive to
changing opportunities with regard to the accessibility of important complementary assets. For
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example, the German co-determination law requires that firms establish staff councils which have
consultation rights with the management over a number of organizational issues (Casper et al., 2005).
In contrast, firm managers in market-based economies are under pressure to put shareholders first and
to constantly reassess market opportunities.
Furthermore, as mentioned above, the financial system in a coordinated economy favors
innovating firms that build long-term organizational competences with business partners and
employees (Whitley, 2002). Whereas, for example, the British system is more outsider-based,
facilitating the rapid reallocation of capital between firms and sectors, the German system is more
insider-based, promoting relatively long-term relationships between banks, families and other
investors and firms (Tylecote & Conesa, 1999; Whitley, 2002). Therefore, a lock-in in the way that
a firm accesses important capabilities (through internal build-up or external acquisition) is more likely
in a coordinated economy than in a market-based economy. In light of the above:
H2: The difficulty with which important complementary assets can be built internally is
positively related to the likelihood of firms choosing cooperative commercialization over
independent commercialization. This relation is stronger among firms in market-based
economies (UK) than among firms in coordinated economies (Germany).
A framework for the interaction of IP protection and complementary assets
In the following, we introduce a four-field matrix to gain further insight into the relationship between
institutional systems, market-related determinants and commercialization decisions. Table 1 shows the
matrix with its central elements: the level of IP protection and the difficulties that innovators have in
developing complementary assets in-house. The cells present four different commercialization
situations. Our matrix is based on the Gans and Stern (2003) framework, which was introduced to
investigate the ventures decision on market entry with regard to the position of established firms.
Whereas the study uses the incumbents contribution to the value proposition through innovation as a
central element, this study uses the difficulty of innovators to develop the complementary assets in-
house. This refinement is necessary, as we do not restrict our analysis to the incumbentventure
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relation, but elaborate on the determinants that make cooperative commercialization preferable to in-
house expropriation.
[Table 1 about here]
Our basic premise is that firms in a market-based economy differentiate more strongly between the
situations that figure in our matrix than firms in a coordinated economy. The likelihood with which
they prefer cooperative commercialization depends on the specific situation. Two obvious and two
ambiguous situations emerge. In a situation where it is neither costly nor complex to develop the
complementary assets internally, but where the protection of the innovation is weak (B), the
framework predicts integration. In contrast, in a situation with difficult internal development of
necessary assets and strong IP protection (C), the innovator will favor cooperative commercialization.
While situations (B) and (C) have well-defined patterns, the remaining fields exert competing
pressures on a firm with regard to its commercialization choice. Whether a firm decides in favor of
cooperative commercialization depends on the presence of mechanisms that support technology
trading. Consider the situation in which it is difficult to provide necessary assets internally and in
which the IP protection is weak (A).3 When choosing the cooperative commercialization strategy, the
innovator risks expropriation by another firm. A cooperative strategy will only be selected if subtle
forces affect the market attractiveness by diminishing the risk of imitation. The amount of publicly
available information and a firms reputation may be powerful forces that induce the trading of ideas.
The more information about a potential partners strategy, financial situation and past business history
is accessible, the more a firm is able to evaluate the threat of expropriation. In addition, in such
outsider-oriented environments, a firms reputation may be of critical importance. If, for example,
sanctions are imposed on those who commit idea theft, e.g. they suffer a loss of reputation as a result,
there is little gain for the potential licensee from capitalizing on the weak IP protection of the
innovator (Gans & Stern, 2003). A licensee will refrain from exploiting a technology supplier if
information about fairness is available and if fairness is regarded as a precondition for technology
trading in the industry. The available literature on the varieties-of-capitalism perspective suggest that a
market-based economy provides a more outsider-oriented system in which much more information
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is publicly available about firms than in a coordinated economy (Whitley, 2002). Furthermore, Porta
et al. (1999) emphasize that in common law countries (market-based economies), accounting is of
higher quality than in civil law countries (coordinated economies). Moreover, the power of
information and reputation is more strongly supported in a system in which intermediaries facilitate
information exchange and trading (Gans and Stern, 2003). Business Angels and Venture Capitalists
can play a crucial role as brokers for ventures and facilitate cooperative commercialization, as they
have repeated interactions with firms in the industry (Hsu, 2006; Robinson & Stuart, 2007). Typically,
these intermediaries are much more present and effective in market economies than in coordinated
economies (Bottazzi et al., 2008).
In the final field (D) with easy development of complementary resources and strong
excludability, both commercialization strategies, in-house and cooperative, may be effective. Here, our
predictions are less clear. However, we presume that compared to situation (B), firms in a market-
based economy might be more likely to prefer cooperative commercialization in such a situation than
in a coordinated economy. As already outlined above, a market-based economy provides a much more
flexible environment for firms than a coordinated economy (e.g., Casper et al., 2005). Compared to
situations where long-term partnerships and strategies prevail, in situation (D), a firm might be more
likely to try a cooperative solution, if this is not binding in the long run and if resources can be shifted
quickly. Thus, we presume:
H3: In situations where
i) IP protection is weakand internal build-up of complementary assets is difficult(A),
ii) IP protection is strong and internal build-up of complementary assets is difficult(C), and
iii) IP protection is strong and internal build-up of complementary assets is easy (D)
firms are more likely to choose cooperative commercialization over independent
commercialization than in a situation where IP protection is weak and internal build-up of
complementary assets is easy (B). This tendency is stronger among firms in market-based
economies (UK) than among firms in coordinated economies (Germany).
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Field of Study and Data
The Biotechnology Setting
The research setting of this study is the bio-pharmaceutical industry. This sector was chosen because
biotechnology is one of the sectors in which cooperative commercialization is regarded as an attractive
means of commercialization (Lerner & Merges, 1998). The development of new drugs is strongly
driven by biotechnology ventures. These firms are responsible for the vast majority of drugs based on
biotechnological methods that are currently in the product pipelines or are already available on the
product market. While a number of these firms have become suppliers in the product market, others
are suppliers mainly to established pharmaceutical firms. McKelvey (1996) argues that the economics
of modern biotechnology can either be a small-firm phenomenon or a complex division of labor,
where the ventures exist in conjunction with public-research laboratories and incumbents.
Sample and Survey Instrument
In 2006 we developed and administered a survey in the British and German biotechnology industries
(see Haagen et al., 2007). We approached bio-pharmaceutical firms located in Germany and the
United Kingdom. Given the heterogeneity of the biotechnology sector, and in order to control for
external effects, only young biotechnology firms active in the bio-pharmaceutical sector according to
the OECD definition (OECD, 2005b) were included in this study. Firms that were not founded in one
of the two countries, firms that are subsidiaries of foreign firms and firms solely offering services or
supplying products without conducting research were excluded. Our sample was identified through
several searches in industry databases (e.g., Biocom, Dechema, Bio Commerce, as well as regional
databases like Erbi, Bio-M) and the Internet. Identified firms were validated against our selection
criteria with the help of biologists and biotechnologists. We ended up with 346 German and 343
British firms that fulfilled the criteria in 2005 and were at least one year old. Each firm received a
personalized letter addressed to the head of management, inviting them to participate in the survey.
Prior to the field stage, we interviewed industry experts from biotechnology associations and firms,
which helped us to design the survey instrument. In addition, 12 pre-test interviews were conducted to
test the questionnaire; this procedure led to some revisions mainly a reformulation of certain
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questions. We decided to conduct face-to-face interviews, since biotechnology firm managers said that
they were reluctant to participate in mail and on-line surveys but were open to face-to-face interviews.
We hired TNS Global to conduct the interviews on a preformatted and tested questionnaire instrument.
Interviews were successfully carried out with managers in 162 German and 118 British firms.
This response rate of 47% for Germany and 34% for the UK provided us with an unusually
comprehensive sample of British and German biotechnology firms. Eighty-nine percent of the German
interviews and 96% of the British interviews were conducted with executive level interviewees.
Eleven German and twenty-three British responses were excluded from this study due to missing
variables. We tested for non-response bias (Armstrong & Overton, 1977) using the date of the
interview to distinguish between early and late respondents. A series of t-tests for independent samples
failed to identify significant differences between early and late respondents, providing evidence that
non-response bias was unlikely to be a problem in this study.
Definition of Variables and Descriptive Statistics
Table 2 presents summary statistics of the variables. Column 2 lists the mean for the entire sample,
Column 3 for the British, and Column 5 for the German sample. Columns 4 and 6 report the standard
deviations for the British and German samples. In Column 7, the results of the test for differences in
means are presented.
[Table 2 about here]
Dependent variable
Whether a firm commercializes alone or via cooperative agreements was used as a dependent variable.
The variable cooperative commercialization is a dummy variable equal to 1 if the firm uses
cooperative commercialization (either by licensing or by a marketing or sales partnership), and equal
to 0 otherwise. Within our sample, 66% of the British and 57% of the German firms entered into
arrangements with other firms, which bring their innovation to the market. The Chi2 test does not
indicate any differences between countries when comparing the means of the two samples. Hence, we
do not infer that firms in the British liberal market economy are more inclined to licensing than
firms in the coordinated German economy.
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Independent variables
The level of IP protection was measured by asking the interviewees whether patents protect the
innovation from direct competitors. IP protection is measured on a five-point Likert scale, ranging
from strongly disagree (1) to strongly agree (5). The variable shows a full sample mean of 3.41.
The single scores are 3.48 for British firms and slightly lower, at 3.36, for German firms. In our pre-
test interviews, we learned that this direct measure is the best indicator of the strength of intellectual
property. The interviewees reported that a patent does not automatically mean that the innovation is
sufficiently protected.4
The variable ease of providing important capabilities internally was built as a multiplicative
term consisting of two measures: the ease with which complementary assets can be built internally and
the importance of complementary assets. The latter is used to weight the ease measure. It was
calculated by asking the firm managers to appraise the importance of several assets in generating rents
from their innovation. In this study, we conceptualize the importance of complementary assets as a
formative construct consisting of five indicators (Cohen, Cohen, Teresi, Marchi, & Velez, 1990). The
interviewees were asked to assess the importance of five assets for appropriating value from the
innovation that we had identified as necessary for commercialization in the biotechnology sector.5
The
construct is specified as a summative index (Barclay, Higgins, & Thompson, 1995). The linear sum of
the component scores was created and then divided by the number of items (Cronbachs alpha=0.75).
The mean for the British firms was 3.29, the mean for the German firms 3.10. We applied the same
procedure to build the measure indicating the ease with which complementary assets can be built
internally (Cronbachs alpha=0.70). This formative construct measured how easy it was or would have
been to provide the necessary complementary assets in-house. The scale ranges from not easy (1) to
very easy (5). The mean for the German firms was 2.94, slightly higher than for the British (2.89).
The multiplicative term ease of providing important capabilities internally shows a mean of 9.57 for
German firms and a mean of 9.91 for British firms.
Some variables were included that are known or expected to influence the commercialization
mode, although they are not involved in the hypothesis discussion.
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VC-financed firm. We use the variable VC-financed firm to control whether a firm is VCfinanced before the commercialization decision or not. Hsu (2001; 2006) suggests that venture
capitalists serve as intermediaries, which results in VC-financed firms being more likely to
enter cooperative commercialization than in-house expropriation. Summary statistics show
that 25% of British firms were VC financed at the time of the commercialization decision,
compared to only 21% in Germany.
Product firm. The variableproduct firm has been included in order to control for differencesin the commercialization mode between firms that are mainly active in developing products
(diagnostic devices, therapeutics, and vaccines) and firms that specialize in platform
technology. In both countries, about 60% of the sample firms sell biotechnological products.
Low-price strategy. The respondents were asked to rate on a five-point Likert scale howstrongly the firm differentiates itself from competitors by offering a low-price innovation. We
expected a firm that differentiates itself by a low price to be rather fully integrated. In our
interviews, we learned that these firms try to be independent from (downstream operating)
firms by supplying the market with low-price technology or products. Table 2 shows that a
low-price strategy is more important in Germany than in the UK (GER mean: 2.72; UK mean:
2.39).
Independent firm foundation. We employed the variable independent firm foundation toinvestigate whether the firm had been founded independently, or founded as either a spin-off
(e.g., of a public research institute or firm) or as the result of a merger. Firms that are
associated with another organization from the beginning are perceived to be more likely to
make use of cooperative commercialization than firms founded independently (see Gulati,
1995). Within the full sample, about 61% of the firms were founded as spin-offs or in the
course of a merger (36% are university spin-offs, 15% are research institute spin-offs, 9% are
company spin-offs and 1% were founded in the course of a merger).
Team size. The number of members comprised in a management team has been included toaccount for the effect of team size. It is likely that a firm with more team members prefers a
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full integration strategy to specializing in upstream stages of the value chain. Examining the
number of top-level managers per firm reveals interesting differences. There are twice as
many senior managers in British firms than in German firms. On average, British management
teams consist of 4.3 persons, compared to 2.2 persons in German firms.
Age. Age is measured in number of days from a firms inception to 31/12/2005. In the relevantliterature, different opinions are expressed on the effect of age on the commercialization
mode. Some scholars argue that young firms are more likely to out-license technology than
older firms because young firms are not fully integrated at the outset (e.g., Hsu, 2001). In the
early stages of a firms development, it may be more efficient to rely on a prominent partner
with expertise in the product market to introduce a product into the market than to invest in a
cost-intensive and risky marketing and sales force. Kollmer and Dowling (2004) show in a
recent study that, in contrast to that assumption, the achievement of full integration for
biotechnology firms does not depend on the age of a company. The variable also accounts for
potential time-varying market effects. The average British firm is about 6.6 years old
(median), while the age of the average German firm is 5.9 years.
The bivariate relationships among the independent and control variables are reported in Appendices 1
and 2. Appendix 1 lists the correlations for the German firms and Appendix 2 for the British firms.
Empirical Approach and Instrumental Variables
An issue we want to discuss is the possibly endogenous character of IP protection. The sample firms
might patent for strategic reasons, e.g., to facilitate gains from cooperative commercialization. We
introduced a two-step procedure to take the endogeneity of the variable into account. In the first step,
we regressed the endogenous IP protection variable on all the other independent variables, along with
additional exogenous instruments. The predicted values were then used in the second-stage regression.
We used the following two exogenous variables as instruments for the IP protection variable in the
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first-step regression: first, the field level of IP protection6
is included (see, for example, Cassiman &
Veugelers, 20027; Haeussler, forthcoming), and second, the level ofinnovativeness of the technology
or product. We perceive that innovations with a rather radical character are more likely to be patent-
protected than more incremental innovations. The variable innovativeness is measured on a five-point
Likert scale.8
Multivariate Analysis and Results
Level of IP Protection and Complementary Assets
Table 3 reports the results for the determinants of commercialization strategy separately for the British
and the German firms. A robust binary probit model is used, with the dependent variable being the
probability of cooperative commercialization. Models 1 and 2 contain the control variables for the
British and German samples. The independent variables are added in Models 38. Models 5 and 6
depict the result with the level of IP protection variable being instrumented and Models 7 and 8 report
the marginal effects for the British and German samples.9
A comparison of the models, calculated
using the non-instrumented and the instrumented IP protection variables, demonstrates that the
correction of endogeneity of theIP protection variable does not change the findings on signs, and only
slightly changes the degree of significance of the coefficient of some variables. In the last column, we
examined differences between the British and German samples for each independent variable. We use
a Wald-type test for differences according to Williams (2006).10
In all models, the variable IP protection is significantly related to the commercialization
choice. Firms with a higher level of IP protection are more likely to use cooperative commercialization
than to commercialize alone in both countries. In addition, the results show that the Wald test for
differences between coefficients in the two models is statistically significant, indicating that the size of
the effect is larger for the British firms. At the margins, an increase in the strength of IP protection at
the mean of the other variables increases the likelihood of cooperative commercialization by 0.290 (at
1% significance level) for the British firms and 0.160 (at 5%) for the German firms. Hence, an
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increase in the strength of IP protection implies an 81% higher increase in the probability of British
firms commercializing through another firm than in that of German firms. We also used an alternative
measure to investigate the effect of IP protection. Whether the firm had applied at least for one patent
to protect the innovation was linked to the commercialization decision. We found that 68% of the
German firms and 76% of the British firms had applied for at least one patent to protect the
innovation. The multivariate model (reported in Appendix 4) shows that this alternative IP protection
variable is significantly positively related to cooperative commercialization for the British firms (at
1%) but not significantly for the German firms. The Wald test indicates a country difference (at 1%).
To sum up, both measures for IP protection indicate that, in their commercialization decision, British
firms weight IP protection more heavily than German firms. This provides support for our H1.
Testing the influence of the costs associated with providing complementary assets internally,
we found the difficulty with which important complementary assets are provided internally to be
positively related to cooperative commercialization in both countries. This finding is in line with our
expectations and thus supports H2. An increase in the variable ease of providing important
capabilities internally decreases the probability of commercializing the innovation through a third
party by 0.057 (at 1%) for the British and 0.030 (at 1%) for the German firms. The Wald test indicates
a country difference (at 5% level).
In the models, we included firm-level variables to control for potential sources of unobserved
heterogeneity. The coefficient of the variable VC-financed firm was not significantly related to the
commercialization mode for firms in Germany, and for firms in the UK it was only slightly negatively
significant. In an additional model, we included a variable measuring the intensity with which the
venture capitalist is involved in the commercialization strategy. Here we did not find a significant
effect in either the German or the British model. Whether the object in question is a product or a
technology influences the commercialization in both countries. Products are more likely to be out-
licensed or brought to the market via a partner than a platform technology. As expected, a firm that
strongly differentiates itself from competitors by offering a low price ( low-price strategy) is more
likely to be fully integrating than firms that do not pursue a low-price strategy. However, the effect is
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only significant for the British sample. We controlled for how a firm was founded (independent firm
founding) to account for heterogeneous firm history. The results revealed that being independently
founded influenced negatively cooperative commercialization for the German firms (at 1%) and the
British firms (at 10%). For the German sample, management team size was significantly positively
associated with the probability of cooperative commercialization (at 10%). The variable age was
negatively, but not significantly, related to cooperative commercialization when the independent
variables were included.
[Table 3 about here]
Combinations of IP Protection and Complementary Capabilities: Four Fields
In the following, we further elaborate on country-specific differences regarding the impact of market-
related determinants by testing the introduced framework (see Table 1). In doing so, we focus on
combinations of the characteristics of the two central market-related drivers of commercialization
strategy: the level of IP protection and the difficulty of providing internally important complementary
assets. These two central elements define four commercialization situations. Table 4 depicts the
distribution of the sample firms to the four fields. IP protection was defined as strong if the
interviewees strongly agreed and rather agreed that their patents protected the innovation from
direct competitors.11
We split whether important complementary assets are easy or difficult to develop
internally at the median of the full sample.
[Table 4 about here]
The four field variables were coded as dummy variables. The situation in which a firm is faced with
weak IP protection but with no difficulties in providing important complementary assets internally (B)
serves as the reference case. We assumed that in this situation, a firm will most likely choose to be
fully integrated in order to commercialize alone. External commercialization would force the
innovator to disclose sensitive information without adequately protecting the innovation. However,
risking hazardous appropriation by another firm is not necessary since the complementary assets can
easily be provided internally. In Table 5, the results of the robust probit models are reported. Columns
2 and 3 list the estimated coefficients and Columns 4 and 5 the marginal effects.12
First, we turn to the
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results of the situation where the innovation is strongly protected by patents but where it is difficult for
the firm to provide important complementary assets internally (C). As hypothesized, the results
provide evidence that in this situation, the German as well as the British firms choose cooperative
commercialization. The coefficients in both samples are highly significant. Turning from the base case
to Situation C, we see that the probability of cooperative commercialization increases by 0.361 in
Germany and by 0.549 in the UK. The Wald test indicates that the effect is strong for British firms,
which supports H3i (at 10%).
Let us now examine a situation that is difficult for any innovating firm: the innovation is
weakly IP-protected and important complementary assets are difficult to provide internally (A).
Although cooperative commercialization might allow the firm to gain from the innovation without
costly and risky investment in downstream assets, entering a cooperative agreement is accompanied by
the threat of expropriation. When we turn from the base case weak IP protection and ease of
providing important complementary assets (B) to the situation with weak IP protection and
important complementary assets being difficult to provide (A), the coefficient is only positive and
significant for British firms. Hence, there is evidence that in such a situation cooperative
commercialization is more attractive for British firms (Wald test for difference at 1%, see our H3ii).
Finally, we consider a very favorable situation for biotechnology firms in which the innovation is
strongly IP-protected and important capabilities are easy to provide internally (D). The results suggest
that in this case, too, the British firms prefer cooperative to independent commercialization (1%
significance), whereas we do not see a significant effect in the case of German firms. The Wald test
for difference (7.42) indicates significant differences in the coefficients among the two samples (our
H3iii).
All in all, we find that firms in the British market-based economy attach more importance to
the situations that emerge from a combination of the level of IP protection and the difficulty of
building important complementary assets internally than firms in the German, coordinated economy.
This supports our proposition H3.
[Table 5 about here]
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Discussion and Conclusion
Today, a growing number of companies specialize in the generation of ideas. These companies use
cooperative commercialization in order to profit from their innovation. Given the increasing
importance of cooperative commercialization, there is a need to investigate how firms decide whether
to build a novel value chain or to leverage an existing one. In this paper, we analyze the determinants
of the commercialization decision and relate them to country-specific institutional frameworks. We
build on the institutional perspective, which suggests that strategic actions taken across nations may be
a function of differences in the existence, saliency, and intensity of particular institutional
arrangements (Hitt et al., 2004, p. 174).
Discussion of Results
According to the institutional systems literature, there are two major alternative economies which vary
with regard to their market orientation, the liberal market economy and the coordinated economy
(e.g., Whitley, 1999; Hall & Soskice, 2001). How incentives and constraints are perceived in these
economies leads to specific market logics of societies. One might expect their actors to use different
commercialization strategies. However, our results suggest that both the fully-integrated firm strategy
and the cooperative commercialization strategy are adopted by companies in both countries to
approximately equal degrees. At first, this appears to imply that economic systems play a purely
passive role in constraining the choices of decision-makers. However, our analysis reveals that
decision-makers do not rely on the determinants that govern the commercialization decision in the
same way. The purpose of this paper is to determine whether such differences in decision-making exist
and, if so, whether they can be explained by differences in economic systems.
We found that a firm is more likely to opt for cooperative commercialization if (1) the
innovation is patent-protected and (2) the firm faces difficulties in providing important complementary
assets internally. While the main effects exist in both countries, economic institutions apparently
influence the degree to which these criteria are relied on in the process of decision-making. We found
that both central elements of commercialization (Teece, 1998), i.e. IP protection and the investment
costs associated with the provision of capabilities, have a significantly stronger influence on the
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commercialization decision of companies in the British market economy than in the German
coordinated economy (our H1 and H2). We reason that the differences in company law, more
specifically in patent litigation, between market-based and coordinated economies are what
mainly impacts the importance of IP protection for the commercialization choice. In addition, we
argue that the influence of non-market institutional structures on the labor market, company law and
the financial system constrains a firms flexibility, and thus downplays the accessibility of
complementary resources as a determinant of commercialization strategy.
In a further analysis, we examine whether the combination of the two central elements
shapes the strategy of the firms in a market-based economy to a larger extent than in a
coordinated economy. Analyzing the situations that emerge from a combination of the level
of IP protection and the investment costs for providing important capabilities internally, we
found that the British firms are more strongly guided by these situations than the German
firms (our H3).
Theoretical Implications
In this study, we have compared and contrasted the commercialization choices of companies in
market economies and coordinated economies. More specifically, we contrasted the different
institutional ecosystems, presented our hypotheses, and tested how the differences we identified
influence the strategic decision processes of firms. While most other studies relate the strategy
outcome to institutional settings, we followed Hitt et al. (2004) and Zacharakis et al. (2007) and
investigated country-specific patterns in how firms reach their decisions and the criteria they take into
account in the process. The results support the institutional perspective by revealing that there are
differences in the degree to which firms rely on market-related criteria depending on the market
orientation of the systems in which they are embedded.
We further extend the varieties-of-capitalism perspective. Previous studies based on the idea
of two major alternative economies have concentrated on how differences in these institutional
systems generate different incentives for firms to pursue either radical or incremental innovations
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(e.g., Casper, et al., 2005). However, this study is the first to test whether the embeddedness of a firm
in a liberal market economy or a coordinated economy impacts the extent to which it weights
market-related criteria in strategic decisions. In addition, while previous studies in this field have
relied upon case studies representing different countries and historical eras, this study uses a
multivariate approach based on firm-level data and thus follows the demand of numerous researchers
for a quantitative multi-level approach (e.g., Davidsson and Wiklund, 2001; Sorenson, 2007, Luk et
al., 2008). We find that, in a system which favors the free play of market forces, organizational
behavior is more strongly guided by the criteria of market attractiveness compared to a less market-
oriented system. In other words, in a coordinated system, a cooperative commercialization strategy is
not selected simply because it outweighs the costs of introducing an innovation into the product
market on ones own. The various non-market coordinating mechanisms in a coordinated system leave
their mark on the strategic decision-making of firms. Effective strategy-making is a fundamental
aspect of entrepreneurial behavior and a necessary precondition of entrepreneurial firm growth and
international competitiveness. While growth is not guaranteed if firms take into consideration all
criteria and all information relevant to their decision, ignoring or downplaying the importance of such
criteria tends to have a negative effect on firm growth.
Furthermore, this study substantiates the literature on the determinants of cooperative
commercialization. Previous studies have shown that the level of IP protection (Gans et al., 2002),
cost-effectiveness considerations (Gans et al., 2002; Aggarwal & Hsu, 2008), and VC financing (Hsu,
2001; 2006) determine the commercialization of technology. In this study, we add the level of IP
protection and cost-effectiveness considerations to this list and also show that the importance which
firms attach to these criteria depends on the institutional system in which they are embedded.
Moreover, this study demonstrates that the situations that emerge from combining the two
determinants provide interesting insights into the decision-making and market orientation of firms.
Practical Implications
The results have important implications for public policy, ventures and venture advisors. This research
is relevant to public policy since only the precise understanding of the interplay between country-
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specific patterns and market-related forces opens up avenues for effective policy-making. There has
been a long-lasting debate among interest associations in Germany whether to expose more business
areas to market forces or to relax non-market restraints (e.g., labor market). The parties arguing in
favor of market coordination point to the effectiveness of market forces, whereas the opponents fear
that social stability will be affected in a negative way by pure market coordination. The business
owners and managers of firms strongly demand the transfer to a more market-based system, which
would give them greater latitude. In particular, the whole public debate centers on formal rules and
laws that bind the actions of firms. However, the findings of this study suggest that even in areas
without explicit restrictions, market-level determinants are less important than in liberal market
economies. Hence, formal regulations and laws do leave their mark on informal rules that influence
strategic choice.
At this point, we want to emphasize that our study does not yield clear-cut implications for
public policy, with relation to the economic impact that the differences described above have on
market orientation. While some scholars implicitly assume that more market-oriented means more
developed and leads to superior performance, this assumption is untested (see Nelson, 2002; Krahnen
& Schmidt, 2004). It might be true that managers decision-making is more successful if it is
consistent with the logic of the institutional country-specific arrangement. However, testing this
assumption has to be left to future research.
For biotechnology ventures and their advisors, the results imply that differences in the
importance of market-related determinants can be traced back to national antecedents. Although the
findings do not provide insights into whether market-force determination is consistently favorable, the
results might be thought-provoking for firms in coordinated economies that target international
markets.
Limitations
As with any empirical study, this analysis and its results come with some caveats. First, the measures
may not represent the concepts correctly and may suffer from subjectivity. To address this issue, we
interviewed industry experts in the design stage of the study and ran an extensive number of
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alternative specifications, all of which indicated robustness. Second, the variable IP protection may
be endogenous. To elaborate this issue, we applied an instrumental variables procedure as well as
alternative measures, which suggest the core effects to be robust.
Finally, we address the issue of generalizability. Caution must always be exercised when
extrapolating results from a single industry. The biotechnology industry is a prominent example of a
very dynamic and highly collaborative industry. While we believe that the main processes do operate
in other contexts, researchers should take industry specifics into account.
Avenues for Future Research
This analysis provides many avenues for future research. Because much work remains to be done to
fully understand the effect of institutional arrangements on the strategic choices of firms, we list only a
few ideas which directly arise from the findings. First, with regard to specific countries, we feel that it
would be very useful to investigate whether a context-specific system of organizational decision
making is influenced by globalization forces and, if so, how. Second, we would welcome research that
examines in greater detail whether conformity to institutional norms in decision-making pays off or
even quantifies this phenomenon. Future research could also identify whether firms that target diverse
markets (for example, in terms of size and level of competition) choose heterogeneous
commercialization modes in different settings. For coordinated economies, it would be worthwhile
to know whether firms that seek to generate profits in the large international market pay greater
attention to the key elements of markets than firms that focus on home or niche markets.
As the commercialization decision directly impacts the extent to which a firm is able to profit
from its innovation, it lies at the core of firm strategy. We hope that, by identifying how institutional
arrangements influence and shape commercialization strategy, this study will provide a useful
contribution to the relevant body of theory, and helpful practical insights into how firms decide on a
specific mode of commercialization.
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Tables
Table 1. Four-field matrix of commercialization
Internal development of important
complementary assets
Difficult Easy
IPp
rotection
Weak A Ambiguous
situation
B In-house
Strong C Cooperative
commercialization
D Ambiguous
situation
Table 2. General characteristics of the sample
Variable Full
sample
(n=246)
German firms
(n=151)
British firms
(n=95)
Test for
differences in
means
Mean Mean Mean Mean Std.Dev.
Cooperative commercialization (d) 0.61 0.57 - 0.66 - P=0.143
Level of IP protection 3.41 3.36 1.43 3.48 1.17 P=0.757
Ease of providing important
capabilities in-house
9.70 9.57 4.76 9.91 5.24 P=0.599
VC-financed firm (d) 0.23 0.21 - 0.25 - P=0.381
Product firm (d) 0.61 0.62 - 0.61 - P=0.933
Low-price strategy 2.59 2.72 1.38 2.39 1.30 P=0.066
Independent firm founding (d) 0.39 0.39 - 0.38 - P=0.853
Team size 3.02 2.20 1.27 4.32 2.62 P=0.000
Age 8.89 7.44 5.99 9.64 8.64 P=0.019
Last column: unless otherwise specified, the Mann Whitney test has been used.
If then Chi2 test, if then t-test.
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Table 3. Probit models to predict commercialization mode
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Dependent variable Cooperative
commercialization
Cooperative
commercialization
Cooperative commercialization
with IP protection instrumented
(1) (2) (3) (4) (5) (6)
Independent variables Germany UK Germany UK Germany UK
Level of IP protection 0.185** 0.656*** 0.403** (I) 0.864*** (I)(0.084) (0.170) (0.162) (0.259)
Ease of providing important -0.086*** -0.182*** -0.076*** -0.170***
capabilities internally (0.027) (0.036) (0.027) (0.040)
VC-financed firm (d) 0.092 0.015 -0.075 -0.677 -0.143 -0.675*
(0.297) (0.358) (0.310) (0.425) (0.294) (0.398)
Product firm (d) 1.023*** 0.296 0.906*** 0.964** 0.758*** 0.938**
(0.246) (0.329) (0.255) (0.449) (0.277) (0.427)
Low-price strategy -0.080 -0.228** -0.076 -0.330** -0.057 -0.317**
(0.084) (0.113) (0.088) (0.136) (0.088) (0.142)
Independent firm founding (d) -0.687*** -0.473 -0.679*** -0.685* -0.682*** -0.681*
(0.237) (0.309) (0.250) (0.381) (0.248) (0.369)
Team size -0.088 0.059 -0.122 0.031 -0.156* 0.017