Shaken not stirred

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Title: Shaken not stirred
Multinational takeovers in Sweden's pharmaceutical industry
Author: Valentin, Finn; Dahlgren, Henrich
Abstract: Prior research has addressed the role of single large firms in Regional Innovation Systems (RIS), ascribing them the role of "flagships”, "hubs” etc. Less attention has been given to RIS dynamics set in motion when a flagship abruptly rearranges or ceases local operations, as is often the outcome when it is acquired by, or merged into, a larger multinational enterprise. The two flagships of the Swedish pharmaceutical industry – Pharmacia and Astra - shifted from domestic to multinational ownership in 1995 and 1998. We study consequences of this shift focusing on the following issues: i) Whether the shift in ownership brought about expansion or contraction of operations carried out internally by the two firms in Sweden. Observing notably declining activities in Pharmacia and expansion in Astra’s case we discuss control rights as a factor in national regulation affecting long-term strategising on part of key investors. ii) Whether the reduction of Pharmacia’s Swedish operations has been substituted by new firms derived from Pharmacia in the forms of divestments, spin-offs or startups. Identification of the founders of new bio-pharmaceutical firms reveals very little manager-to-founder migration out of Pharmacia, whereas considerably derived activity comes out of firms divested or spun-off while Pharmacia was still fully operative. iii) Whether the recombinatorial capacity of the innovation system in the Stockholm-Uppsala region plays a role in explaining the paucity of Pharmacia-derived start-ups. Compared to the Copenhagen region (the other major biotech concentration in 3 Scandinavia) Stockholm-Uppsala’s RIS is shown generally to have been notably less effective in mobilising industrial managerial talent for bio-entrepreneurship. To better understand this inter-regional divergence we model differences between the two RIS in the supply of venture capital to the financing rounds of young biotech start-ups. In RIS dynamics venture capital has the critical function of connecting managerial talent with entrepreneurial resources. For new bio-firms this particular RIS-function is shown to have performed significantly weaker in the Stockholm-Uppsala region as compared to the Copenhagen counterpart. This deficiency may be expected to rank importantly among causes for the comparatively lower incidence of manager-to-founder transitions amongst Stockholm-Uppsala’s new biopharmaceutical firms.
URI: http://hdl.handle.net/10398/6776
Date: 2007-12-13

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