Canadian Biotechnology Start-Ups, 1991–1997: The Role of Incumbents' Patents and Strategic Alliances in Controlling Competition

Fligstein (1996) contends that organizations act to exploit the institutional context in which they are embedded so as to stabilize the competition they face. Drawing on Fligstein's theoretical analysis, we conceptualize incumbent biotechnology firms' patenting and alliance-building activities as attempts to stabilize and control potential competition and analyze how these activities shape rates of founding in the Canadian biotechnology industry. We find that increases in the level and concentration of incumbents' patenting discourage founding, particularly in human application sectors of the industry where development and approval processes are more costly and time consuming. Incumbents' horizontal alliances depress start-ups; vertical alliances stimulate start-ups. Our findings highlight how technology appropriation and strategic alliances structure the competitive dynamics and evolution of high-technology, knowledge-intensive industries.