Betting on Biotech: Innovation and the Limits of Asia's Developmental State

3. Organizing Bio-industry

81 Chapter 3 Organizing Bio-industry Commercializing biotech is an extraordinarily complex process. It involves the generation of new knowledge in the upstream and the translation of knowledge into usable technological applications that bear market value. Marketable novel technologies need not be just cutting-edge knowledge but also include innovative business models and market savvy, as well as patient, creative, and entrepreneurial investment. The commercialization process encompasses a broad range of different actors and activities, all of which must be integrated in productive ways. Technical and economic uncertainties of biotech innovation, however, complicate this process . Commercializing biotech,as once described to me,involves many moving parts that must be combined and recombined in order to chase down many moving targets. This chapter builds on the last one by untangling these complex processes from the perspective of the firm and the industry. Specifically, this chapter looks at how biotech industries have been organized in Korea, Taiwan, and Singapore. It identifies the core actors in the innovation system, the range of relevant supporting actors, and the strategic interactions between firms, labs, and the state. The analysis further articulates how decision makers in Korea,Taiwan,and Singapore strategically rationalize the ways in which bioindustry is organized. While they face similar challenges in betting against biotech’s myriad sources of uncertainty, decision makers in Korea, Taiwan, 82 BETTING ON BIOTECH and Singapore have organized bio-industry in different ways, revealing quite varied strategic rationales. Data on trends in innovation are a good starting point for making some initial sense of this variation. According to Mahmood and Singh’s study of overall patenting activity in Asia (a crude but still useful measure of innovative output), the specific sources of innovative activity differ markedly.1 In Korea, large business groups, or chaebols, accounted for 81% of all patenting between 1990 and 1999, while other firms made up just 12%. Multinational firms operating in Korea were responsible for less than 1% of U.S. patents, and individual researchers (such as university professors and employees of government research institutes) accounted for just 7%. In contrast, MNCs in Singapore were awarded nearly half (46%) of all U.S. patents granted to Singaporean-based inventors. In Taiwan, MNCs and large business groups accounted for merely 5% of patenting activity, while local firms and research organizations such as the ITRI made up 36% of output.2 The majority of patents in Taiwan (59%) were registered with individuals, universities, and small-scale industrial entrepreneurs.3 Mahmood and Singh also calculate the concentration of patenting activity in Asian countries. The highest levels of concentration, through the end of the 1990s, were in Korea, where 85% of all patents were granted to the top fifty patent earners, basically among the conglomerate chaebol firms. Samsung Electronics alone accounted for 36% of all patents awarded to Korean inventors between 1970 and 1999. Singapore’s innovation activities have been similarly concentrated, and its top fifty patent earners accounted for 70% of all patenting activity. Taiwan’s patent outputs, on the other hand, are much more diffuse, with only 26% of awarded patents concentrated among the top fifty patent earners. The bases of technological innovation in Taiwan have been spread out among multiple sources. In many respects, Mahmood and Singh’s findings are not surprising given what we know about national variations in industrial technology development among these three Asian economies. In Korea, technology development is concentrated among the chaebols, whereas in Taiwan, innovative 1. Their study uses U.S. patent data;patents awarded domestically (i.e.,within the home country) are not included in their data set. However, given that U.S. patents are considered the most difficult to attain and usually provide the largest market access for eventual products, U.S. patent data offer an indication of the most significant and innovative outcomes. Ishtiaq Mahmood and Jasjit Singh, “Technological Dynamism in Asia,” Research Policy 32 (2003), 1045. 2. The ITRI was Taiwan’s top patent earner between 1970 and 1999, with 1,229 patents. See Mahmood and Singh, “Technological Dynamism,” 1046. 3. Thanks to one of the anonymous reviewers of the manuscript of this book for pointing this out to me. ORGANIZING BIO-INDUSTRY 83 activity is diffused among public and private sources. Meanwhile, in Singapore , industrial technology development revolves around the activities of multinational corporations. Differences in both the sources and concentration of innovative activities reflect the overall organization of the respective political...