Networks and alliances in biotechnology Essay Example | Topics and Well Written Essays - 2000 words

Networks and alliances in biotechnology - Essay Example It is general perception among the people in the market that the organization with higher quality collection of alliances will perform better in the long run, which leads to higher market valuation of the firms. The report prepared by the analysts of Goldman Sachs (2005) on the biotechnology firms has closely studied the alliances and has published a long list of such alliances, which suggested that there were quite large number of alliances in this sector. Apart from this, a study conducted by Baum, Calabrese and Silverman (2000) on biotechnology firms of Canada has found that the new firms are more capable of leveraging alliances, especially R&D alliances and are seen to grow at a higher rate. This report focuses on the strategic alliances in the biotechnology firms and unleashing their importance and implications. Primary activities of the Biotechnology Firms Biotechnology is one of the most important emerging technologies that generate several applications, which are applied to v arious fields such as healthcare, fine chemistry, food industry, agriculture and even in the environmental development. Biotechnology encompasses various research methods and technologies that are applied in various sectors. For instance â€Å"recombinant DNA technology can be used to produce large molecule medicines in the pharmaceutical sector, create new crop varieties in the agricultural sector, or create micro-organisms that produce industrial enzymes for the chemical sector† (Organisation for Economic Co-Operation and Development, 2005, p. 6). Reasons for collaboration of the biotechnology firms The alliance formation of the biotechnology firms has gained enough attention from many scholars. These scholars have tried to track the motives of the firms behind the alliances and have found quite significant number of reasons. The cost and risk of innovation involved in the product development for the biotechnology firms are quite high so a majority of the firms look for sha ring these risk and cost involved through strategic partnership. Apart from this, the biotechnology firms look for entering into strategic alliance with established rivals in order to avoid direct competition with those rivals in the product market. Keeping these motives in mind the two key driver that encourages the formation of alliance are firstly the accessibility to the knowledge and other complementary resources and secondly the search for legitimacy. Accessibility to the knowledge and other complementary resources An organization can be well defined as an open-system whose survival is highly dependent on the exchange of resources with various environmental aspects such as the competitors, buyers and suppliers. For biotechnology firms the need for accessibility to knowledge and other resources is due to the challenge that they face in commercialising the process and the development of the products that are considered to be highly resources-intensive. A large number of biotechn ology firms do not have the significant amount of required resources necessary for the execution of the process leading to the development of product; moreover, the intense competition leads to the further squeezing of the existing resources. Thus, strategic alliances provide a way of accessing the