IBUS 412:Special Topic

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IBUS 412 Special Topic

• Topic 2 International entrepreneurship
  entrepreneurship in MNEs
• Reading Birkinshaw, J.M. (1997)
  Entrepreneurship in multinational
  corporations the characteristics of
  subsidiary initiatives
• Theoretical basis literature on a) corporate
  entrepreneurship and b) MNC networks
• Definition An initiative is defined as a
  discrete, proactive undertaking that advances a
  new way for the corporation to user or expand its
  resources (Birkinshaw 1997 207).
• Initiative is an entrepreneurial process with two
  stages
• identification of an opportunity
• commitment of resources to that opportunity

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IBUS 412 Special Topic

• Types of corporate entrepreneurship
• Creation of new business opportunities within
  existing organisation
• transformation or renewal of existing
  organisations
• enterprise changing rules of competition
• Approaches to corporate entrepreneurship
• Focused corporate entrepreneurship (planned,
  administered)
• Dispersed corporate entrepreneurship (emergent)
• ? Initiative is the primary manifestation of
  dispersed corporate entrepreneurship

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IBUS 412 Special Topic

• Two distinct views of the subsidiary as
  distinguished by Birkinshaw (1997)
• Subsidiary role research headquarters assigns
  roles to subsidiaries
• ? consistent with focused corporate
  entrepreneurship
• Subsidiary strategy perspective strategic
  choice and autonomy of subsidiary
• ? consistent with dispersed corporate
  entrepreneurship

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IBUS 412 Special Topic

• Conceptual framework
• Three types of initiative (locus of market
  opportunity)
• Local market initiative
• Internal market initiative (efficiency-oriented)
• Global market initiative
• Additional sets of characteristics
• Facilitating conditions (e.g. structural context)
• Initiative process
• Intended outcome

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IBUS 412 Special Topic
Previous research on three forms of subsidiary
initiative
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IBUS 412 Special Topic
Summary of the findings (1)
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IBUS 412 Special Topic
Summary of the findings (2)
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IBUS 412 Special Topic

• Case study Novartis (Switzerland)
• (Foundation 1997 merger of Ciby-Geigy and
  Sandoz)
• Industry characteristics
• US 430.3bn annual sales in 2002
• Regional structure Triad (88)
• National health systems try to reduce costs
• Switzerland 2nd in exports (after Germany)

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IBUS 412 Special Topic

• Pharmaceutical products
• Original products protected by patents (up to
  25 years)
• Generic products low-cost due to expired
  patents
• Over the counter (OTC) available without
  medical prescription
• Competitive context
• Mature industry marked by a process of
  concentration (MA)
• Market fragmentation

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IBUS 412 Special Topic

• NOVARTIS
• 7th largest firm in pharmaceutical industry
• 360 subsidiaries in 140 countries
• 73,000 employees generate global turnover of US
  23.1bn (2002)
• 1996 merger of equals was the largest in
  industrial history
• Focus on innovation Novartis, derived from
  novae artes (lat.) means new capabilities
• 1996 concentration on core businesses
  Healthcare, Agrobusiness, and Nutrition
  made Novartis No. 1 in life sciences, No. 2 in
  nutrition
• Agrobusiness externalised (sale)
• 2002 concentration on 2 divisions Pharma and
  Consumer Health

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IBUS 412 Special Topic

• Research and development (RD) in the
  pharmaceutical industry (1)
• Fundamental research conducted by only 50 of
  about 7,500 firm in the industry particularly by
  cooperating with universities and research
  institutes
• RD process (1) search for effective
  substances (2) preclinical tests (3)
  clinical tests
• Total process from first phase to approbation by
  regulatory bodies 12-14 years costs exceeding
  US 500 million, doubling ever 5 years
• Given a maximum patent protection of 25 years,
  remain 10 years for amortisation

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IBUS 412 Special Topic

• Research and development (RD) in the
  pharmaceutical industry (2)
• Less than 30 of patented products generate
  profits, 6 of products generate 70 of total
  sales (blockbuster products)
• RD process critical but marked by high
  uncertainty
• 4 types of pharma producers (1) integrated
  generalist, (2) integrated specialist, (3) RD in
  standard areas, (4) no RD
• Novartis Integrated generalist in Pharma
  type (3) in Consumer Health (imitation)

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IBUS 412 Special Topic

• RD at Ciba-Geigy
• After merger of Ciba and Geigy in 1970
  concentration of RD in Basle and Summit, NJ, 2
  other institutes in NY and London
• Fundamental research/key technologies
  concentrated at headquarters
• Decentralisation of mature projects
• Decisions on new projects in RD Conference
• Development decentralised to adapt to national
  regulations
• Reinventing-the-wheel in dispersed subsidiaries
  caused high costs, delayed time-to-market, and
  impeded learning
• 1990s global streamlining of RD process,
  learning-by-cooperating

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IBUS 412 Special Topic

• RD at Sandoz
• Concentration of RD in Basle and Bern, 2
  specialised institutes in Wien, East Hanover
  (USA), and Paris, in addition to small local labs
• Fundamental research/key technologies
  concentrated in Basle/Bern
• Complementary research in other locations
• Decentralised RD for local adaptation,
  exploitation of local networks (e.g.,
  cooperation) and knowledge (inputs for
  local/global innovation)
• Decentralised cooperation strategy and wide
  scope of research areas provide impetus for
  innovation (e.g., early entry in biotechnology)
• Increasingly fragmented RD reorganised in 1994
  (2 areas with centres of excellence, global
  project management)

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IBUS 412 Special Topic

• RD at Novartis
• Objective most competitive, most innovative
  Research Organization
• Tasks 1) Integration of inherited organisations
  (11 main labs)
• 2) Definition of an own RD strategy

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IBUS 412 Special Topic

• Building the new RD function
• Functional integration at first no geographical
  relocation
• Since 2000 reorganisation, i.e. specialisation,
  integration, and relocation of research units
• Process culminates 2003 in the foundation of the
  Novartis Institute for BioMedical Research (NIBR
  in Cambridge (USA) as the nerve centre for all
  other labs
• Regional centres in order to have access to most
  innovative regions