Competing business models in the french biotech industry

Public authorities have recently supported development of the biotechnology sector by encouraging start-ups and creating favourable environments such as incubators, a specialised stock exchange or technopoles. The different programmes to encourage biotech development (subsidies for research performed jointly by firms and academic labs, subsidies for start-ups, creation of incubators) seem to be successful if the results are estimated in terms of the number of new firms (around 300 SMEs still in existence, since 1990). On 1 January 1999 France had just over 400 biotechnology SMEs employing a total of 15,000 people, with an estimated turnover of 2 billion euros. Average size in terms of number of employees per firm is about 40, compared to about 140 in the USA. All in all, biotechnology remains a small emergent sector compared to others such as agri-food (over 4,200 French firms with 372,300 employees and a turnover of 100 billion euros) or pharmaceuticals (94,500 employees in 271 firms and a turnover of 28,5 billion euros). The creation of start-ups during the past ten years raises questions on the future of these new biotech firms (DBFs) in France and in Europe. Will consolidation occur in Europe and, if so, when? Will maturity of the biotech sector be accompanied by the progressive disappearance of many of these firms and the growth of a few of them? Will the sector be structured along the same lines as the automobile industry, with large firms with a high capacity for integration of research performed elsewhere and a large number of specialised firms? What will the future be of the hundreds of small firms which focus on the local or regional market, especially service oriented firms? To answer these questions, this paper presents three business models of biotech firms. By referring to the governance modes of each business model of biotech SMEs, it provides us with a better understanding of the logic of development of biotechnology SMEs in France. The first part presents the linkages between business models and governance modes. The second part, based on a survey on half of the 400 dedicated biotech firms (DBFs) in France, presents an overview of these firms and their development. The third part presents an attempt to map out the development trajectories of SMEs and the respective leading forces in each type of firm. Concluding remarks present three possible scenarios of the evolution of the sector.