Entrepreneurship and the Construction of Value in Biotechnology

Abstract

Through our historical analysis of the evolution of biotechnology, we show that highly varied understandings of the value embodied in biotechnology existed. Across three eras (1973-1986 and 1988-2000 and 2003-present), entrepreneurs constructed different economic logics for biotechnology, often in highly contested settings against multiple entrepreneurial adversaries. We also find that an economic logic was not easily stabilized; biotechnology’s evolution was arrested by moments when the stabilized constellations fell apart (in 1987-1989 and again in 2001-2002) and new logics were constructed. We argue that such breakdowns may occur when evidence fails to meet critical tests or when different understandings of value are in conflict. These breakdowns create new opportunities for other entrepreneurs to construct alternative economic logics. By exploring these processes of contestation, (temporary) stabilization and subsequent breakdowns, we contribute first to the entrepreneurship literature by expanding the definition of the entrepreneurial act. We find that the entrepreneur creating a new firm to commercialize a technology, while being a Schumpeterian opportunity seeker, is also acting as an institutional entrepreneur, constructing the economic logics and institutional setups as they build their organizations. Not only does this perspective redefine the role of Schumpeterian entrepreneurs, it also opens up the discussion of entrepreneurship to a whole set of different entrepreneurial actors who may not be creating firms but who are seeking to shape the economic logic and institutions which will govern the system of exchange. Second, we contribute to the literature on technical change by showing that entrepreneurs are central actors in this process. Their challenge is to exploit, negotiate and resolve the uncertainties created during the emergence of a new technology. They must develop an economic logic and constitute the logic in an effective organization. In doing so, they act to change the institutional setup in a process that shapes and is shaped by the evolving technology. By taking this view, we present a broader definition of the institutional arrangements that are central to technical change, placing legal institutions promulgating and defining patent law alongside government agencies establishing safety regulations together with financial market institutions validating the financial value of a startup. By examining the entire the institutional setup, we can more precisely explain patterns of technical change. We show that such change may not be smooth, but instead can be arrested or change direction when compromises about the economic logic break down. As such, the forces shaping technology evolution are best understood as not purely technical, but also, and unavoidably, economic.

Keywords: entrepreneurship, innovation, construction of value, biotechnology, technical change, technology evolution

JEL Classification: A14, L65, M13, O33