C U R R E N T   R E L E A S E
September 20, 1999

"Don't go it alone," study warns Canadian biotechnology startups

TORONTO - "Don't go it alone," warns a recent study conducted by U of T professor Joel Baum and Ph.D. student Tony Calabrese, in partnership with Harvard's Brian Silverman. Founding alliance networks may be the most important factor affecting early success for Canadian biotechology startups. 

In the first study ever to explicitly link startup performance to founding alliance network composition, the researchers found a striking relationship between the type, quality, and overall configuration of strategic alliances a biotechnology startup establishes at the time of its founding and its initial success and growth. 

"Our study looks at the strategic alliance networks biotech startups' founders configure, and provides some clear guidelines for practicing managers of biotech startups in Canada. The most basic prescription? Don't go it alone. But, that's easier said than done -- unless the founder's social capital is substantial, gaining alliance-based access to quality sources of technical and commercial capital can be very difficult," says Prof. Baum.

For example, the study found that:

• Multiple alliances with the same type of partner yield fewer benefits than alliances with different types of partners for two reasons. Same-type alliances offer access to less diverse pools of information; and such alliances often mean partnering with firms that are each others' rivals, sparking conflict that may ultimately undermine the alliance.

• Although establishing alliances with complementors is generally beneficial, judiciously allying with potential rivals that provide more opportunity for learning and less risk of intra-alliance rivalry is also. But, allying with the wrong rival can be deadly.

• Startups with ties to industry associations experience poorer initial performance than startups without such ties. Founders lacking their own social capital may need to seek out such associations for help brokering alliances of their own.

For more information, contact:

Professor Joel Baum Canadian National Chair in Strategic Management Rotman School of Management, University of Toronto Voice | (416) 978-4914 E-mail | baum@rotman.utoronto.ca

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