Creating Competitive Advantage for the Swedish Stem Cell Industry

Background of Research Study: At the heart of a nation’s economic growth lie new ideas and new business formation, with these activities generally taking place within existing corporations and through new start-up activity. However, the path to success for start-up firms is a difficult one since young firms generally have higher failure rates than well-established firms. Researchers have suggested that these failure rates are due to a “liability of smallness” and/or a “liability of newness”, characterized by a lack of stable relationships and a lack of sufficient resources. Research in several high-growth industries, such as biotechnology, suggests that one of the keys to understanding the successful emergence and development of start-up firms lies in theories of social capital. More specifically, researchers have found that a firm’s social capital or position within its greater inter-organizational network has a significant impact on the firm’s ability to access the necessary resources for survival and growth, such as financial support, talent, know-how, and legitimacy

In an emerging industry, such as the stem cell industry, start-up firms generally do not have the necessary resources in-house that are required to succeed in such a complex and dynamic environment. Therefore, the development of formal as well as informal external relationships is required in order to become access the appropriate external expertise and other necessary resources. Within the stem cell industry, this inter-organizational network thus consists not only of stem cell firms, but also pharmaceutical and marketing firms, financial institutions, universities and research centers, government actors, and other regulatory authorities. Additionally, a firm must ensure that it has the appropriate internal networks among its employees such that knowledge is effectively shared and leveraged throughout the firm to support further knowledge creation. The ability of a firm to develop a high level of social capital comprising the appropriate set of external and internal networks as well as the ability to share and integrate knowledge are considered key organizational competencies that lead to the creation of a sustainable competitive advantage.

Purpose of Research Study: While there is broad agreement that social capital is important to a firm’s performance, fewer inroads have been made into understanding exactly how competencies in emerging firms develop and how the patterns of a firm’s external and internal network relationships impact its development from inception through emergence to growth. Thus, this research study proposes to follow the development of Sweden’s stem cell industry from emergence to growth. In the specific context of the individual stem cell firm, the purpose of this study is twofold: 1) to examine and describe the social capital of company A over time, and 2) to determine how company A can increase the effectiveness of its networks to ensure that knowledge creation and the ability to create competitive advantage are maximized.