Management practices that enhance innovation intensity and performance in biotechnology firms

© 2006 Dr. John P. MorganGlobalization and the exponential growth of information on genetics and DNA have led to major changes in the management practices and strategies in biotechnology organizations and in governments throughout the world. These changes include: • The growing recognition by organizations of the strategic importance of innovation management as "the engine of growth" and the key to long-term sustainability; • Increasing awareness by biotechnology organizations of the need to form strategic alliances in order to capitalise on market opportunities such as treatment of AIDS, Hepatitis C, and the growth of aged-related illnesses in industrialised countries; • The need to attract venture capital and large scale investment to fund the complex and lengthy clinical trial phases associated with the development of new drugs and treatments; and • The recognition by organisations of the growing importance of managing knowledge and intellectual capital as valuable strategic assets in a global marketplace which is highly competitive for skilled and experienced knowledge workers. Although there are many biotechnology organizations where the above management strategies have been successfully implemented, there is still considerable misunderstanding of the innovation process. There is also a widespread failure by the private and public sectors to recognize that the innovation process needs to be managed ‘from idea to market’. Some managers apply traditional short-term strategies to address the long-term challenges posed by the development of new drugs and treatments in the biotechnology industry. This is commonly referred to as "short-termism". The problem of short-termism becomes compounded because biotechnology is an emergent and disruptive technology undergoing rapid change and convergence with other technologies such as information technology. Anecdotal evidence and the limited number of empirical studies on management practices in the biotechnology industry suggest a lack of awareness and perception of innovation management and the requirements for developing innovation intensity as a prerequisite to effective innovation performance at the organizational level. The purpose of this research is to identify those management practices and strategies which enhance the innovation intensity and performance in biotechnology organizations. This was achieved by investigating the relationships between management practices and strategies with innovation intensity and performance. A model was developed as part of this research using a framework of constructs based on extensive research of the literature. This model was tested to identify the constructs and variables (comprising those constructs) which had a significant and positive relationship with innovation intensity and performance in biotechnology firms. Therefore, the model used in this research has been developed based on well grounded analytical techniques, established theory and multiple methodologies. Hypotheses were developed to test the relationships between the independent variable constructs, specific independent variables within the constructs, and the dependent variable construct (innovation intensity). The relationships were tested using a database consisting of 102 completed responses from Australia and 68 responses from Europe. Survey responses which were only partially completed were deleted from the database. The responses from Australia were mainly from Victoria and Queensland with a small number of responses from other States. The European responses were from 3 leading biotechnology countries in Europe namely Austria, Belgium and the Netherlands. Biotechnology firms and biotechnology associations in other European countries were invited to participate in the survey but did not respond. The hypotheses were further explained by utilising six case study firms. These companies were recognized by their peer groups and biotechnology industry associations as "success stories" because of their reputation for implementing management practices and strategies as a strategic part of their innovation performance programs. A major finding was that the constructs of the model provided a valid and reliable model for measuring and predicting the relationship between management strategies and practices and innovation intensity. For example, dimensions such as management support, project management and commercial orientation had a significant and positive effect on innovation intensity. The second major finding was that Organisational Climate had a positive but insignificant effect on innovation intensity. However, removal of the organisational climate construct from the model weakened its predictive power in relation to innovation intensity. This finding, from the quantitative analysis, was qualified by the case study research thus highlighting the benefit of using multiple methodologies. The most significant finding, and contribution to the theory, was the identification of management practices which had a positive and significant effect on the variables comprising innovation intensity. This finding was also qualified by case study research. The study concluded that a long-term strategic approach to new product development (radical innovation) is critical to innovation performance in biotechnology firms. Continuous improvement (incremental innovation) is also important for companies to improve their existing products and organisational capacity to meet customer needs. The constructs of the model such as Management Support, Organisational Climate, Project Management, Commercial Orientation and Innovation Intensity complement each other as part of a broader strategic approach to innovation management and performance. The limitations of the study and the implications of the research findings for managers and policy makers are reviewed along with directions for future research into innovation management in biotechnology firms