Dynamic capabilities and new product development in high technology ventures: An empirical analysis of new biotechnology firms

In industries populated by entrepreneurial high technology firms, the rapid development of new products is viewed as a key determinant of success. Developing a portfolio of new products is necessary to gain early cash flows, external visibility and legitimacy, early market share, and increase the likelihood of survival (Schoonhoven, Eisenhardt, and Lyman 1990). In addition, recent research has shown that new, product development improves a jinn's ability to, raise money through an initial public offering (Deeds, DeCarolis, and Coombs 1997). This paper develops a model of new product development which is rested on a sample of 94 pharmaceutical biotechnology companies. We hypothesize that new product development capabilities are a function of a firm's scientific, technological, and managerial skills. To test this relationship, we develop several firm specific measures in an attempt to triangulate in on the core construct affirm specific new product development capabilities. Some important implications for entrepreneurs/managers of high technology firms pawl from our results. First, entrepreneur/managers need to view the choice of geographic location as an important strategic decision which will impact their fir-in's access to the skilled technical personnel and the streams of knowledge. Our results indicate that a choice location has a significant concentration of similar firms, but the level has nor ver reached a point where competition for resources in the local environment offsets any advantages of the location. In the case of biotechnology this would seem to indicate that the prime locations would be expanding areas such as San Diego, Seattle and Philadelphia rather then the established locations of Silicon Valley and Boston. Second as scientific knowledge plays an elder more important role in a firm's success the quality of the firm's scientific team is a critical ingredient in a firm's new product development capability. But how do you evaluate the quality of scientific personnel? Our results indicate that there is a strong positive relationship between the impact-as measured by citations-of a team's prior research in the academic community and the productivity of that team bz a commercial research laboratory. Therefore, the judgement of a scientific field, captured by citations or perhaps ex-pert judgement, should prove to be a useful tool when evaluating personnel for a firm's research team. Third, the results from our. meastures of CEO experience and the percentage of rite tap management team with a Ph.D. are interesting As expected the prior experience of CEO in managing a commercial research facility enhances a firm's new product development capabilities. However; results for our top management team variable appears to indicate that the over reliance on technical personnel in the management of the organization detracts from the product development process. Taken together these results seem to imply that it is important that the leadership of the organization have knowledge of and experience in managing the new product development process, brit that diverting the firm's scientific personnel's energies away from the laboratory and into the management of the organization maybe counter-productive. Therefore, what a high technology venture appears to need is leadership that understands and has experience in the new produce development process, but which is separate and distinct from the scientific team. This type of leadership keeps the scientific team focused on research and development, and out of the boardroom (C) 1999 Elsevier Science Inc.