The success of biotech clusters in relation to the institutional frameworks: Are biotech clusters better off in liberal economies?

Abstract

The EU needs to increasingly focus on biotechnology, since this industry forms the key to establishing a knowledge-based economy. One of the unique characteristics of this industry is its high levels of clustering and it is, therefore, interesting to investigate what makes biotech cluster successful. There is, however, little consensus on the factors that determine a cluster’s success. This debate is partially about which market economies, i.e. liberal market economies (LME) or coordinated market economies (CME), can best sustain the radical and incremental segment of a successful biotech industry. Literature suggests that LMEs are better suited for radical innovation, while CMEs are better able to facilitate incremental innovation. The purpose of this paper is to test this hypothesis and to determine how successful biotech clusters look like with respect to their national institutional frameworks. From the varieties of capitalism approach three important aspects of the institutional framework are derived; how firms acquire skilled labor, financial means and technology transfer. Through an empirical examination of four European biotech clusters that represent either a radically or an incrementally innovative cluster in either a LME or a CME (Cambridge, Berlin, Oxford and Munich), the influence of the institutional framework on the success of biotech clusters is investigated. The results indicate that the hypothesis can be rejected since both economies are able to successfully facilitate both the radical and incremental segment of the biotech industry when circumventing the institutional disadvantages.