The Entrepreneurial Influence of GSK and its Predecessors
Maryann Feldman and Nichola Lowe
As an illustrative example of our database and its analytical potential, we have used founder employment records compiled from LinkedIn and other sources to trace 144 firms to GlaxoSmithKline and its antecedents of Burroughs Wellcome and Glaxo Wellcome. This has enabled us to engage in a long standing academic debate over ‘spawning’ of new entrepreneurial firms from the stock of existing and well-established firms. Spawns are distinct from firms that spin-out from government laboratories or universities. Spawning instead refers to an employment relationship when the new company founder was previously employed at another private sector entity. Spawns may be either formal or informal spinoffs from a parent company. Thus while the number and type of entrepreneurial startups in a region is an important indicator of economic robustness, the number and type of spawns provides additional information about the connections between large and small firms in the region and the degree to which founders benefit from employment and social ties to other regional firms.
The vast majority of the Glaxo spawns we have identified were established in the wake of acquisitions, mergers and major corporate restructurings, which resulted in both voluntary and involuntary employment termination. Our relational database enables us to track the formation and development of these entrepreneurial spawns overtime, including business type, technology specialization, commercial success, employment growth and level of institutional support, including external financing. Equally, we are able to capture founder employment rank at the Glaxo firms, which in turn affected their level of severance support and access to intellectual property upon departure. Combining these data with founder interviews and archival materials gathered on the history of the Glaxo group, allows us to trace changes in the way GSK and its predecessors supported entrepreneurial development in the region—this is an underexplored area in a well-established literature on spawning. In turn, we are better able to capture changing organizational strategies at GSK and its predecessors and explore how they have influenced the types of new business establishments it has spawned over the years and also affected the industrial structure in the region.
We drew on the database contents to identify Glaxo spawns and then conducted in-depth interviews with a representative sample of firm founders. In addition we held focus groups for different cohorts of founders, based on their years of employment at GSK and its predecessors. Through our analysis, we discovered that a sizeable share of these entrepreneurial spawns established in the wake of the first merger between Glaxo and Burroughs-Wellcome specialized in contract research and clinical trial management organizations rather than de novo drug discovery or new product development. Using archival materials, we determined this coincided with a 1990s strategy shift at Glaxo-Wellcome towards greater outsourcing of research and clinical trial development. In turn, this first wave of service-oriented entrepreneurial spawns contributed greatly to the build out of North Carolina’s burgeoning contract research (CRO) industry—today, the Research Triangle region is home to approximately 150 CROs, the largest regional concentration in the world. Our interviews also revealed the importance of statistical expertise at local universities and the presence of firms like SAS that provided sophisticated analytical tools and thus, a competitive edge for newcomers in contract research. Equally, early CRO firms in the region, like Quintiles and Pharmaceutical Product Development (PPD), helped provide a role model and inspired others to follow suit. Still, our analysis suggests the development of this specialized sub-sector of life science was strongly influenced by the practices and strategies of Glaxo-Wellcome as an influential anchor firm, a contribution that the current literature has yet to fully recognize. In fact, executives at Glaxo-Wellcome were especially supportive, encouraging former employees to set up regional CROs with promises of long-term contracts.
Based on our analysis, 55% of entrepreneurial firms created shortly after the merger of Glaxo and Burroughs-Wellcome specialized in some form of contract research or analytics support. In contrast, the vast majority (61%) of new firms created in the wake of the 2000 merger involving Glaxo-Wellcome and SmithKline Beecham specialized in new drug discovery or medical device development—with significantly less (32%) focusing on contract research and related analytics. Some of this shift in focus reflected the establishment of formal licensing agreements with GlaxoSmithKline (GSK) that enabled bench scientists to take their research program and ideas with them to their new firms. Strong internal channels for asset development and out licensing supported this. But equally, regional institutions were far more developed at the time of the second merger and our interviews with firm founders confirm these institutions offered a wider range of support services for technology and business development.
GSK and its predecessors are not alone in creating a lasting regional entrepreneurial imprint. As a result of our continued data collection efforts, we have identified a dozen or so large multi-jurisdictional firms other than those in the Glaxo group that have spawned sizeable numbers of entrepreneurial firms. These include IBM, Nortel, Sony-Ericson, Red Hat and Becton-Dickinson & Co, to name a few. Spawning by these firms is so essential to the regional entrepreneurial economy that we find virtual parity in the number of entrepreneurial start-ups attributable to the regions three major research universities and those attributable to the top three spawning corporations. While several of these spawn-producing firms experienced periods of downsizing, others like Red Hat and Becton-Dickinson have been operating mostly in high-growth mode thus allowing us to examine additional factors that might shape cross-organizational differences in entrepreneurial spawning. As we consider the potential influence of large anchor firms on industrial and entrepreneurial development in the region, we are currently taking steps to identify entities that are less likely to spawn new establishments. One important example in the Research Triangle is SAS Software, a firm that initially spun-out of North Carolina State University in 1976, however has not resulted in many next generation start-ups. That said SAS still has a regional entrepreneurial influence, which our database allows us trace through their involvement in key support institutions.
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