Firm Strategy and the Wealth of Regions Maryann P. Feldman - PowerPoint PPT Presentation

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 NNOVATIVE D ATA S OURCES FOR R EGIONAL E CONOMIC A NALYSIS 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 +200 production Zebulon 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 High layoff merger discussions (fails to materialize) predicted 2000 GlaxoSmithKline is formed through the merger of Glaxo -400 layoffs Wellcome and SmithKline Beecham. 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 12 Number of Firms Started 10 8 Non-Merger Year Merger Year 6 4 2 0

Firms Started After Glaxo-Burroughs Wellcome and Glaxo Wellcome- SmithKline Beecham Mergers 18 31 Firms 59 Firms 16 14 Number of Firms Started 12 Glaxo- Burroughs 10 Wellcome 8 Glaxo 6 Wellcome- SmithKline Beecham 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: Merger 2: Glaxo-Burroughs Wellcome 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 2 nd Generation Spawns 100 13 Leading Spinners 90 90 1. Lineberry Research Associates 80 2. DJ Pharma Number of Firms Started 70 3. Inspire Pharmaceuticals 4. ProviderLink 60 5. Cytospect Pharma 6. Healthmatics 49 50 7. Nuada Pharmaceuticals 8. Phase 40 BioPharmaceuticals 9. Pozen, Inc. 30 10. SARCO 11. Triangle Pharmaceuticals 20 39 12. Victory Pharma 13. Zen-Bio 10 13 0 GSK Spawns 2nd Generation Spawns

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 maryann.feldman@unc.edu http://maryannfeldman.web.unc.edu