Influence of financial and policy environments on the business strategy of biotechnology companies in India

Sumesh Mohan Arora

Abstract

The biotechnology industry thrives on innovation and new knowledge creation, but is also capital intensive with a complex regulatory environment (Hine and Kapeleris 2007). It is seen as a sunrise industry by the Indian government (Natesh and Bhan 2009). Current literature on the business strategy of Indian biotechnology companies and the influence from external factors is very limited. The objective of this research was to qualitatively test the applicability of the Miles and Snow (1978) theory of organizational behavior which describes four strategy choices: prospector, analyzer, defender and reactor, in the context of the Indian biotechnology sector. Research on Western biotechnology companies (Wiesenfeld-Schenk 1994) indicates these companies are likely to follow prospector strategies since they operate in a rapidly changing business environment (Hynes and Mollenkopf 2006). India has also undergone many policy changes starting with trade liberalization in the early 1990's (Kumar 2006), the formalization of a venture capital industry in 1988 (Mitra 2000), and a patent regime change in 2005 (Mueller 2008). This research looked at the impact of the financial and policy environments in India on the business strategy of small-to-medium sized, privately held, indigenous biotechnology companies. These companies were classified within the M-S framework based on the following parameters: innovativeness of their product offering, value proposition, marketing strategy, extent of professional networking, financing strategy, and intellectual property creation. Based on a series of semi-structured interviews conducted in India and the United States, this research found firms pursuing the analyzer strategy comprised the largest group (45%) in the survey sample of 20 firms. There were only six prospectors (30%) and four defenders (20%). Although this was contrary to general expectations that most biotechnology companies should be prospectors, research showed the Miles and Snow theoretical framework was applicable in the case of the Indian biotechnology sector. The implications of this research are to provide a structural framework for managers in biotechnology or other emerging industries to analyze product development and marketing decisions. The researcher has attempted to formulate policy recommendations, including a qualitative model for interorganizational collaboration, for the promotion of this sector in India or other developing countries.