Firm Strategy and the Wealth of Regions
Maryann P. Feldman
University of North Carolina, Chapel Hill
Ewing Marion Kauffman
Motivation
• Questions of regional growth & viability
– Why some places grow and thrive?
– What factors are instrumental for new firm formation &
growth?
• Need for more theoretical development
– Is Silicon Valley the archetype or one archetype?
– Boulevard of Broken Dreams
• Appreciate theorizing
– Even our understanding of Silicon Valley evolves
– Is Silicon Valley the archetype or one archetype
Route 128
Research Triangle Park
Proximity vs. Political Geography
I NNOVATI VE DATA SOURCES FOR REGI ONAL
ECONOM I C ANALYSI S
Maryann Feldman, Alex Graddy Reed, Lauren Lanahan,
Glenn McLaurin, Kari Nelson, and Andrew Reamer
How do firms benefit from
location?
How do firms benefit from
location?
How does location benefit
from firm actions?
Porter’s Conceptualization of Strategy
• Limited to Competition
– Framework to understanding competition (1998:2)
– Microeconomics-based approach to economic
development useful government (1998:7)
• Nothing to inform cluster genesis
• Firm strategy notably absent
Constructed Locations
• Building a Cluster while Building a Firm
• The existence of knowledge spillovers implies
a subsidy
– Rent seeking
– Capacity building
• Geography as a Platform for Innovation
The Concept of Corporate Strategy
“Corporate strategy is the pattern of decisions
that …. defines the kind of economic and human
organization it is or intends to be and the nature
of the economic and noneconomic contributions
it intends to make to its shareholders,
employees, customers and communities.”
-- Andrews 2003: 52
The underappreciated role
of firms in regions
• Enforcement of Non-Compete Agreements
– Gilson ,1999; Mars & Fleming ,2010
• Make or Buy Decisions/local
– Poppo and Zenger, 1998; Cassiman & Veugelers ,2006
• Philanthropic Contributions
– arts & culture – Gardberg & Fombrun ,2006
– infrastructure – Lowe & Feldman 2010
• Employment Conditions
–
–
–
–
Stock options/Profit sharing
Educational Benefits
Skunkworks
Severance packages
Entrepreneurs as
Organizational ByProducts
• Technical and product knowledge
– Agarwal et al., 2004; Chatterji, 2009; Sørensen and Phillips, 2011)
• Market related know-how
– Agarwal et al., 2004; Klepper and Sleeper, 2005
• Reputation and legitimacy signals
– Gulati and Higgins, 2003
• Ties to customers and suppliers
– Ferriani et al., 2012; Semadeni and Cannella, 2011
• Affiliations to financial and social capital
– Phillips, 2002; Burton, Sørensen and Beckman, 2002; Roberts,
Klepper and Hayward, 2011
• Transfer Organizational Practices - HR practices rather than
Strategy
– Feldman, Reichstein & Ozran 2013
GlaxoSmithKline & its antecedents
Year
Event
NC Impact
1970
Burroughs Wellcome production facility moves to Greenville, +1,900 by 1995
North Carolina.
1971
Burroughs Wellcome opens RTP research site
+ 339 employees
1971
+2,100 by 1995
1983
Glaxo Inc moves Headquarters to RTP & manufacturing to
Zebulon
+200 production
jobs 1983
+3,000 by 1995
1995
Glaxo and Wellcome merge as Glaxo Wellcome.
-1652 layoffs
- 535 early
retirements
1998
Glaxo Wellcome and Smith Kline Beecham enter into initial
merger discussions (fails to materialize)
High layoff
predicted
2000
GlaxoSmithKline is formed through the merger of Glaxo
Wellcome and SmithKline Beecham.
-400 layoffs
2005 +
Restructuring and the Great Recession
-Various layoffs
142 Glaxo/Burroughs Spawns
Accidental Entrepreneurs -- fall or is pushed into
an opportunity
New Firms Started with Links to GSK
16
14
Number of Firms Started
12
10
8
Non-Merger Year
Merger Year
6
4
2
0
Firms Started After Glaxo-Burroughs Wellcome and Glaxo WellcomeSmithKline Beecham Mergers
18
31 Firms
59 Firms
16
Number of Firms Started
14
12
GlaxoBurroughs
Wellcome
10
8
Glaxo
WellcomeSmithKline
Beecham
6
4
2
0
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Industry Sector for Glaxo-Burroughs Wellcome Spawns
ollars
Merger 1:
Glaxo-Burroughs Wellcome
10%
16%
45%
26%
Drug Discovery & Medical Devices
CROs
Business Services
ICT
White “Shirts” versus White “Coats”
Merger 1:
Glaxo-Burroughs Wellcome
Merger 2:
Glaxo Wellcome-SmithKline Beecham
10%
10%
12%
16%
45%
15%
63%
26%
Drug Discovery & Medical Devices
CROs
Business Services
ICT
13 GSK Spawns Founded 80% of 2nd
Generation Spawns
100
90
13 Leading Spinners
90
1.
Number of Firms Started
80
70
60
49
50
40
30
20
10
39
13
0
GSK Spawns
2nd Generation Spawns
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
Lineberry Research
Associates
DJ Pharma
Inspire Pharmaceuticals
ProviderLink
Cytospect Pharma
Healthmatics
Nuada Pharmaceuticals
Phase
BioPharmaceuticals
Pozen, Inc.
SARCO
Triangle Pharmaceuticals
Victory Pharma
Zen-Bio
The Character of Place
• Business Strategy can build Prosperity
– Places & Regions are intertwined
– Government can’t do it alone
• Investments in Place
– Sentimental? Altruistic?
– Feasible for the long term for the private sector?
• New Logic of Economic Development
Thank you
[email protected]
http://maryannfeldman.web.unc.edu