E-Magazine
International Entrepreneurship: UK Bioscience Business Incubators – a Future Role in Foreign Direct Investment
Dr Ken Larkin and Dr Jim Gazzard, London BioScience Innovation Centre
Bioscience is predicted to have the same impact on the first half of the twenty first century as the silicon chip had on the last half of the twentieth century. The sector’s capacity to develop novel treatments for patients with life threatening conditions is well established. UK bioscience employs 19,000 knowledge workers in 500 UK-based specialist bioscience companies. Around half of these companies are SMEs based across the UK in 20 specialist bioscience business incubators. The R&D programmes of many of these smaller firms are helping to restock the withered product pipelines of global pharmaceutical companies.
However, in today’s economy the bioscience industry is facing some of the toughest business conditions experienced in recent years. Prior to the credit crunch, UK biotech expenditure was increasing by 25% per year. Today, however, there is a profound shortage of early-stage venture capital investment and the prolonged closure of the IPO window has resulted in a shortage of investment capital. Accordingly, for example, university technology transfer offices are primarily licensing their technologies to existing firms rather than forming new start-up companies as commercialisation vehicles.
Increased levels of bioscience SME failures and the shortage of new start-ups are having a knock-on effect on the commercial operations of bioscience business incubators. The London BioScience Innovation Centre (LBIC) is one such incubator. It has experienced at firsthand the dramatic effects of the recession such as the consolidation of client companies and downward pressure on rents.
However, at LBIC at least, there are now clear positive signs that the situation is stabilising. A number of client companies are starting to take additional laboratory and office space, and new client enquiries are increasing. Interestingly, despite the depressed nature of the global economy, the upturn is being primarily fuelled by overseas companies looking to establish a foothold in the UK market and capitalise on the favourable exchange rates.
UK Trade & Investment’s (UKTI) latest inward investment report announced 1,744 inward investment projects over the last year (2008/09) - setting another record for inward investment projects into the United Kingdom. Of these investments 140 were life sciences related. The international nature of the sector is well known, but it is particularly interesting to note from the academic literature that technology-dependent SMEs frequently internationalise early in their development in order to gain access to technologies and expertise and/or to exploit market opportunities.
LBIC is typical of most UK bioscience incubators in several respects; it is owned by a research intensive university (The Royal Veterinary College, University of London) and supports a range of client companies from university spin outs, entrepreneurial start ups, more established companies and international subsidiaries. However we believe we are unique among UK bio-incubators in having international clients exceeding 40% of our total client base. With very few UK university bioscience spin outs in the pipeline, LBIC’s management team has increased its focus on overseas markets in order to maintain occupancy levels, broaden its portfolio of clients and thereby manage risk and maximise the presence of high growth potential clients. However, in order for us to further develop our international focus and tailored services, we need to better understand the needs of international entrepreneurs and “Born Global” companies.
Many UK technology incubators actively compete to recruit and provide accommodation for overseas clients. However, whether they have a defined and effective strategy to support clients upon arrival is unclear. Specifically, we know little about the competitive advantages gained when a foreign company moves into a technology incubator environment. Perhaps they perceive there to be a high value in accessing the networks and expertise of incubator management and fellow tenants when considering local markets, finance, legal systems, recruitment of staff, training and accessing academic expertise. Does the support provided by incubators really tip the competitive landscape in their favour?
This all points to the need for increased engagement with (i.e. listening to and responding to) individual technology SMEs, specialist internationalisation consultants, UK-based firms wishing to support these companies and governmental agencies supporting inward investment such as UKTI and regional development agencies. Additionally, incubators should work with academic entrepreneurship researchers to better understand overseas technology SMEs needs and whether technology incubators help to build the effectiveness, sustainability and future profitability of these international SMEs.
