1.
INTRODUCTION
Despite
high interest in developing the biotechnology industry as the growth engine of
the future national economy in developed and developing countries, few
empirical studies have been used to scrutinize critical success factors in the
biotechnology sector in countries with industry in early development stages. In
this study, we review the relevant literature, and start our investigation from
a developing country of interest, i.e. Iran. But, to investigate the topic in a
better manner, we should firstly define biotechnology. Biotechnology was
defined in 1919 by Karl Ereky[1], in order
to describe methods and techniques which produce substances from row materials
with the aid of living organisms (FÁRI AND; KRALOVÁNSZKY, 2006).
A
standard definition of biotechnology was proposed and agreed upon in the
Convention on Biological Diversity in 1992, which argues: "any
technological application that uses biological systems, living organisms or
derivatives thereof, to make or modify products and processes for specific
use" (YOUNG, 1986). This definition was agreed by 168 member nations, and
accepted by the Food and Agriculture Organization of the United Nations (FAO)
and the World Health Organization (WHO) as well (MAHBOUDI et al, 2012).
Keeping
pace with the growing importance of biotechnology and its potential to address
some of our urgent needs such as those in food and health care industries, a
spurious and somewhat bogus debate on biotechnology business has been started
in Iran. The last decade has also seen a significant growth in importance of biotechnology
firms in numbers of establishments and also in employment. This research
concentrates on identification of external success factors in biotechnology
business in Iran. Then, the main question is: "what are the critical
external success factors of biotechnology firms in Iran?" In order to
answer this research question, we follow a qualitative approach which includes
interview sessions. In order to do so, first of all we review the theoretical
background of this area and then we will discuss the methodology. Afterwards,
the findings of our study are presented and the paper concludes.
2. LITERATURE
REVIEW
Today,
the pharmaceuticals, biotechnology, medical devices, and diagnostics form the
backbone of a growing and rapidly integrating life science industry complex
(LSIC) estimated to be worth a trillion dollars in sales. There is every
indication that the importance of this set of science based industries will
grow very significantly in the future. Indeed a number of prestigious reports
speak of the emergence of a bio-economy by 2020 or 2030 (MROCZKOWSKI, 2010). In
recent decades, Iranian policymakers tried to facilitate the infrastructure
movement in the area of biotechnology. In 2004, a long-term plan for the
national biotechnology policy was prepared in which different aspects of
biotechnology have been defined in terms of education, research, production,
and international relations. In recent times, the Ministry of Health and
Medical Education has allocated a considerable grant especially for
biotechnology in all Iranian universities. This special grant reveals the great
importance of biotechnology in the current 5-year plan of national development.
It should be noted that the research activity and importance of biotechnology
had a strong impact on the progress of this field in the country. A recent
trend toward the export of biotechnology products manufactured by private
companies has started. It is noteworthy that some Iranian biotech products have
been exported to Europe, South America, India, Egypt and Pakistan (MAHBOUDI,
2005; LARIJANI; ZAHEDI, 2007; JOSHI, 2013).
Critical
success factors have been defined as “those few critical areas where things must
go right for the business to flourish” (ROCKHART, 1979). Critical success
factors are particularly useful to practitioners as they provide clear guidance
on where to focus attention (SHANKS et al, 2000). Critical success factors and
performance indicators provide the biotechnology industry with a foundation on
which to grow and manage risks. There is a huge demand in the industry to
define the success factors that dictate what makes a company successful. This
need is driven by the reality that in order to attract capital to promote
industry growth, investors require predictable indices (VANDERBYL; KOBELAK,
2007).
New
biotechnology firms often set up in regions that have innovative firms,
government laboratories and universities, which attract them to enter (NIOSI;
BAS, 2001). A number of emerging economies increasingly expend resources to
improve national innovative capabilities and create knowledge economies through
the development of biotechnology industries. Standard measures and ways of
tracking biotechnology industry progress, such as those used by the OECD, were
designed for developed economies (MROCZKOWSKI; ELMS, 2009).
In
future, biotechnology will become an even more global industry and new entrants
from emerging economies will continue to make efforts to become players.
Emerging market governments and private sector leaders are aware of the
strategic importance of the bioeconomy for the future and of the opportunities
that the rapid international outsourcing of R & D may bring. A number of emerging
economy governments have launched national "catch up" policies of
rapid biotechnology development,
including Singapore, Taiwan, Brazil, and South Korea (MROCZKOWSKI; ELMS, 2009).
Iranian government also launched a variety of policies to develop biotechnology
industry. The main institutes involved in the biotechnology sector of the
country are as follows:
·
National Institute for Genetic Engineering and
Biotechnology,
·
Pasteur Institute of Iran,
·
Razi Institute for Vaccine development,
·
Universities (Sharif University, Tarbiat Modares
University, Tehran University of Medical Sciences, Mashhad University of
Medical Sciences, Gorgan University of Medical Sciences, Zanjan University of
Medical Sciences, Hamadan University of Medical Sciences, Shiraz University of
Medical Sciences, Semnan University of Medical Sciences, Tehran University,
Tabriz University of Medical Sciences, Shahid Beheshti University of Medical
Sciences, and Islamic Azad University),
·
Persian Golf Biotechnology Research center,
·
Agriculture Biotechnology Research Center,
·
Royan Research Centers, and
·
Avacinna Research Centers.
The
principal policies in biotechnology sector of the country include: National
Biotechnology Committee at Ministry of Science, Research and Technology;
National Strategic plan of Biotechnology; Biotechnology Committees at Ministry
of Industry and Mine, Ministry of Health, Ministry of Agricultural jihad,
Department of Environment protection. Moreover, the main priorities of Iranian
biotechnology sector are:
·
Molecular detection of infectious and genetic diseases
·
Production of Recombinant medicines and vaccines
·
Bioremediation
·
Bioinformatics, Bisafety and Bioethics
·
Transgenic plants Resistance to Biotic and Abiotic
Stress
·
Human Genome Diversity
·
Bioleaching of Cooper
·
Oil desulphurization
·
Privatization of Biotechnology Industry
The
advancement of biotechnology as a
successful industry, confronts many challenges related to research and
development, creation of investment capital, technology transfer and technology
absorption, patentability and intellectual property, affordability in pricing,
regulatory issues and public confidence (MAHBOUDI et al, 2012). Based on the
scientific research and reports, biotechnology techniques can solve several
potential problems. But what is the opinion of ordinary people about these
types of changes? Just a decade ago, the awareness of biotechnology was very
low in most countries. For example, surveys indicated that only about one-third
of consumers in the USA have heard or read much about biotechnology. In 1995,
similar results obtained from Japan, France and UK (Hoban, 1997). Although
during recent years, increased media coverage led to a significant increase in
public awareness but not public knowledge (SHEIKHHA et al., 2006)
In
sum, an entrepreneur planning to establish a biotechnology firm in Iran has to
overcome a lot of different barriers. Partly, those are typical bureaucratic
barriers making entrepreneurship difficult in general. However, there are also
specific barriers related to spin-offs initiatives. On top of that there are
special difficulties specific to the sector of biotechnology. Therefore, in
this paper, we reviewed the literature and tried to identify the external
critical success factors for biotechnology business in Iran.
3. METHODOLOGY
The
multiple case study research approach is used in this research. Case studies
are used to study phenomena within their real world context (YIN, 1989), and
may be used to build theory as well (EISENHARDT, 1989). In this study, a
process model and a set of critical success factors were synthesized from the
literature and provided a framework based on which interview protocols were
developed and the multiple case study data is presented. The unit of analysis
in the study is the management teams of the firms of our study. Multiple case
study data was collected by two researchers, using interviews of approximately
one and a half hours duration and based on the same interview protocol.
Interviews were conducted with several different stakeholders within each of
the companies. Other data was collected from project documentation and other
company literature (DARKE, 1998). Data were collected in 2011-2012, based on
the interviews from managing boards of 30 biotechnology firms in Iran.
4. RESULTS
4.1 General
Environment (GE)
Here,
general environment is defined as "environment which parameters are
relevant to all systems or organizations" (CVILIKAS et al, 2007; SALAMZADEH
et al., 2011). More specifically, by general environment we mean those elements
which are peripheral to biotechnology firms, and are not included in other
three categories. The main elements are as follows:
·
Motivating environment:
Motivating
environment is of crucial importance in the success of biotechnology firms. The
purpose of a motivating environment is to encourage every member of a
biotechnology firm to motivate himself/herself to contribute his best effort to
the job at all times (KAMERY, 2004). Based on our findings, a motivating
environment is a critical success factor for biotechnology firms, as it helps
these firms in handling their activities and paves the way for their
success.
·
Culture:
Culture
is regarded as an emancipating way of approaching organizational phenomena, and
as a metaphor for revitalizing organizational theory. Culture consists of the
patterns of meanings that link these manifestations together, sometimes in
harmony, sometimes in bitter conflicts between groups, and sometimes in webs of
ambiguity, paradox, and contradiction (MARTIN, 1992; SOOREH et al., 2011). An
appropriate culture will make biotechnology firms more able to succeed in
running their business. In contrast, an inappropriate culture might lead in the
failure of biotechnology firms.
·
Role models:
A
role model is someone whose values, attributes, or accomplishments are admired,
but the role but the role model may have no personal connection to his or her
admirer (BECK; LAUDICINA, 2001). Role models can still be an effective means of
imparting professional values, attitudes, and behaviors in biotechnology firms.
These individuals could pave the way for the success of biotechnology firms as
they are considered as the unwritten rules of the game.
4.2 Political
Position (PP):
The
political position is defined by the general legislative system of the society
and designed legal considerations (SVENSSON, 1986). By political position, one
might determine the ease of performance by biotechnology firms. Among these
elements, the followings are of paramount importance for biotechnology firms.
·
Rules and regulations:
Rules
and regulations governing access and exchange of human biological samples are
complex and depend upon the nature of the material, national legislation, the
position of the countries, etc. (REYMOND, 2002; FARSI et al., 2013). Motivating
rules and regulations could lead in a clear regulatory system which is a
fertile ground to improve biotechnology business. Also, these could hamper the
fluent and fluid activity of biotechnology firms.
·
General support:
Products
of biotechnology research may not be predicted and broad general support is
needed (GREIF; MERZ, 2007). Otherwise, if general support is not available, the
success of biotechnology firms might be unclear. General support is a vital
factor in the success of biotechnology firms, as it could increase or decrease
the degree of success for biotechnology firms.
·
Political stability:
Political
stability and the certainty and enforceability of property rights are two
important issues for biotechnology firms (PERSAUD, 2001). In more stable
countries, biotechnology firms could act more freely, while in less stable
countries, the success of biotechnology firms is a function of bans, embargos,
freedom, etc.
4.3 Economic
Position (EP):
The
economic position is defined by the general economic system of the society and
economic realities, which can be improved by reducing disposal and liability
costs, conserving resources, and improving an organization's public image (CARTER
et al, 2000). Among these elements, the followings are considered as the most
important ones:
·
Liquidity:
The
shareholdings of biotechnology firms are mainly composed of persons involved in
biotechnology. The liquidity of such firms, when they are listed, may be
reduced compared to other sectors that are easier to understand for a large
public of investors (MANGEMATIN et al, 2003; LEVITAS; MCFADYEN, 2009).
·
FDI:
Although
foreign direct investment (FDI) cannot be regarded as a substitute for domestic
capital, there is growing evidence that the firm can grow by tapping foreign
investors (MALO; NORUS, 2009). These FDIs could lead in more improvements in
both technology and techniques. As biotechnology is a high-tech industry, it
highly relies on investments. This investment could be domestic or kind of FDI.
In both cases, the investment will grow the pace of technology improvement and
guarantee the success of biotechnology firms.
·
Investment:
In
the early stages of development, biotechnology firms miss no opportunity to
signal the abilities of their scientists as well as the science they are
undertaking. Especially, the scientists can also serve as bait to the
investment community (AUDRETSCH; STEPHAN, 1996; TANHA et al., 2011). Growth of
biotechnology is a function of investment in these firms.
4.4 Market
Position (MP):
The
market position is defined by the market success and the strength of the market
position in comparison to the competition (LECHLER, 2001). To some scholars
market position is defined in terms of one firm's share of the total market and
its relation to competitors in the industry (STEVENS et al, 1998). In this
research, the following elements are the most important ones for biotechnology
firms:
·
Marketing and sales:
The
commercialization of biotechnology is characterized by extensive cooperative
arrangements. In comparison with not-fully integrated firms, the transaction
value decreases if the fully integrated licensor has their own marketing and
sales activities (KOLLMER; DOWLING, 2004).
·
Rivalry:
Seemingly,
product competition in biotech involves less rivalry (Powell, 1996), and more
specialization. But, in these industries, the competitive landscape and the
rules of competitive rivalry change constantly (GEORGE et al, 2002).
The
following framework illustrates the external critical success factors for biotechnology
firms.
Figure 1: External Critical Success Factors in Biotechnology
Firms
5. CONCLUSION
The
development of biotechnology is making rapid progress and the importance of
biotechnology is growing. Nowadays, both developed and developing countries are
competing in becoming pioneers in new areas of biotechnology. Therefore,
gaining knowledge about the critical success factors is becoming of paramount
importance in this domain. In this paper, we concentrated on Iranian biotechnology
firms and investigated their success factors. But, a different point of view in
this research deals with external factors which could be considered as the main
institutional elements. Based on the findings, critical success factors are
categorized in the following categories: General Environment (GE), Political
Position (PP), Economic Position (EP), and Market Position (MP). General
Environment (GE) is defined as "environment which parameters are relevant
to all systems or organizations" (CVILIKAS et al, 2007) which includes:
Motivating environment, Culture, and Role models. Political Position (PP) is
defined by the general legislative system of the society and designed legal
considerations (SVENSSON, 1986), and include: Rules and regulations, General
support, and Political stability.
Economic Position (EP) is defined by the general economic system of the
society and economic realities, which can be improved by reducing disposal and
liability costs, conserving resources, and improving an organization's public
image (CARTER et al, 2000), and includes: Liquidity, FDI, and Investment.
Market Position (MP) is defined by the market success and the strength of the
market position in comparison to the competition (LECHLER, 2001), which
includes: Marketing and sales, and Rivalry.
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