The Determinants of Commercialization Strategy in UK and Germany

8/6/2019 The Determinants of Commercialization Strategy in UK and Germany

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The Determinants of Commercialization Strategy:

Idiosyncrasies in British and German Biotechnology

Carolin Haeussler

Ludwig-Maximilians-Universitt Mnchen

Institute for Innovation Research, Technology Management and

Entrepreneurship

[email protected]

forthcoming: Entrepreneurship Theory and Practice

Abstract

The intention of this paper is to investigate whether market-related factors have a stronger influence on

the strategic decision-making of ventures in liberal market economies than on that of their

counterparts in coordinated economies. Thereby, we focus on a particularly important strategic

decision that firms face the commercialization choice. Using a unique survey dataset on the

commercialization of British and German biotechnology firms, we analyze the determinants of

commercialization strategy, paying particular attention to national idiosyncrasies. Together, the

findings indicate that the commercialization strategy follows distinct patterns in the British liberal

market economy and the German coordinated economy.

Keywords: commercialization strategy; institutional theory; country comparison

JEL Classification: M13, L24, O32, O34

Acknowledgements

I like to thank Joachim Grammig, Marc Gruber, Dietmar Harhoff, Holger Patzelt and two

anonymous reviewers for valuable comments on an earlier version of this paper. Financialsupport from the German Research Foundation (SFB TR 15) and from the Munich Center of

Health Sciences is gratefully acknowledged.


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Introduction

The institutional perspective emphasizes the impact of the systems that surround organizations and

shape their processes and decision-making (Scott, 2001). Institutions provide formal and informal

rules of the game that guide the behavior of human actors and organizations (North, 1990). Part of the

explanatory power of institutions is due to the belief that institutional factors affect strategic decisions

of companies (Hoskisson, Eden, Lau, & Wright, 2000; Scott, 2001; Hitt, Ahlstrom, Dacin, Levitas, &

Svobodina, 2004). Given the heterogeneity of national institutional settings, there is a need to shed

light on inter-country differences in companies strategic decisions. Previous studies have examined

the effect of various institutional environments on strategic choices. Researchers analyzed, for

example, the strategic actions in different institutional settings such as R&D specialization (e.g.,

Casper, 2000), selection of alliance partners (Hitt, Ahlstrom, Dacin, Levitas, & Svobodina, 2004),

diversification (Kogut, Walker, & Anand, 2002), internationalization (Coeurderoy & Murray, 2008),

foreign direct investment and ownership levels (Delios & Henisz, 2000) and venture capital financing

(Bruton & Ahlstrom, 2003; Ahlstrom & Bruton, 2006; Zacharakis, McMullen, & Shepherd, 2007).

These studies found country-specific patterns that have been attributed to institutional differences.

One important but under-investigated aspect where national institutional frameworks differ is

in their market orientation. The varieties of capitalism perspective differentiates between two major

alternative economies which vary in their market orientation, the liberal market economy and the

coordinated economy (e.g., Whitley, 1999; Hall & Soskice, 2001). The intention of this paper is to

investigate whether companies that make strategic decisions in more market-based economies put

greater weight on market-related criteria than companies operating in coordinated economies.

An important strategic choice that companies in all countries have to make is how to

commercialize technology. The dramatic increase in licensing in the last two decades questioned the

paradigm of the fully integrated firm. Companies have to calculate whether they are likely to make

more profit by introducing a technology into the market on their own or by entering cooperative

commercialization agreements (Teece, 1998; Gans, Hsu, & Stern, 2002). In the rest of the paper, we


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shall refer to the choice that companies make between cooperative and independent commercialization

as the commercialization choice. In particular, entrepreneurial firms often show strong invention

capabilities but encounter difficulties in successfully commercializing their technology. Rosenberg,

Landau, & Mowery (1992) argue that the efficacy with which innovations are utilized in the economy

is a key variable affecting the rate of economic growth. The OECD (2005a) corroborates this

argument, and bemoans the fact that firms in several OECD countries lag behind US firms in their

ability to commercialize national biotechnology efforts.

This study contrasts the commercialization choice of biotechnology firms in two European

countries, the United Kingdom and Germany. After the US, these two countries accommodate the

largest number of biotechnology firms but provide very different ecosystems. We suggest that the

British economy is organized around liberal market institutions that are supposed to accommodate

market-oriented decision-making more readily, while the highly regulated and predominantly

coordinated German economy is expected to decrease the importance of market-related criteria in

companies decision making.

We analyze the strategic choice of commercialization of 151 German and 95 British

biotechnology firms and test whether the two market-related determinants mentioned in the literature

by Teece (1998) and Gans et al. (2002), i.e., the level of IP protection and the difficulty with which

important complementary assets are accessible, influence the companies in the two countries in

different ways. The statistical results imply that even in the high-technology sector, where firms target

international markets and globalization forces are at work, country-specific differences shape the

commercialization choice. We find that British firms rely on market-related criteria to a greater extent

than German firms.

This study makes the following contributions: first, it demonstrates that a firms

commercialization choice determines how much a firm profits from its innovation (Teece, 1998);

understanding a firms decision-making process is at the core of firm strategy. Existing literature has

identified the level of IP protection (Gans et al., 2002), cost-effectiveness (Gans et al., 2002; Aggarwal

& Hsu, 2008) and whether a firm is VC-financed or not (Hsu, 2001; 2006) as determinants of


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technology commercialization strategies. We add the institutional system in which a firm is embedded

to this list. Second, in doing so, we not only emphasize the impact of institutional arrangements on the

type of strategy that is selected, but also investigate the impact of these institutional arrangements on

how the strategy is selected. Here, we add to recent contributions by Hitt et al. (2004) on alliance

partner selection and by Zacharakis et al. (2007) on VC investment decisions. These studies provide

evidence that the importance which firms attach to specific decision criteria varies due to differences

in the institutional framework. Our study reveals that the market orientation of the institutional system

determines how strongly firms take market-related criteria into account when making a decision.

Third, this study extends the varieties-of-capitalism perspective. Whereas proponents of this

perspective have concentrated on how differences in two institutional systems, the liberal market

economy and the coordinated economy, generate different incentives for firms to pursue distinctive

innovation strategies (e.g., Casper, 2000; Whitley, 2002), we show that firms in these systems also

differ as to the weight they put on market-related decision criteria.

The results not only extend the literature, but also have important implications for policy-makers

and practitioners. This paper is a first step towards understanding country-specific patterns in the

selection of commercialization strategies and thus in the development and attractiveness of a market

for ideas. The results of this analysis are relevant to public policy, since only a precise understanding

of the interplay between country-specific patterns and market-related determinants opens up ways for

effective policy-making. With regard to biotechnology ventures, as well as advisors and investors, the

findings point to a particular logic behind the process of selecting a commercialization strategy, which

varies depending on the country in which a firm is based. In particular, they imply that even in the

high-technology sector, where firms target international markets, firms in coordinated economies

pay less attention to market-related factors when making a commercialization choice, compared to

firms in market-based economies.


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Conceptual Framework

Cooperative Commercialization: Literature and Empirical Predictions

Among the first who conceptualized the role of cooperative commercialization for firm strategy, Teece

(1988) presents a framework which identifies market-related factors that determine who profits from

an innovation.1

He highlights the presence of enforceable intellectual property rights, which generates

a new environment for innovation management where the focus is on how to capture value. Teece

(1986) argues that the decision on whether or not to exploit the innovation in-house or via cooperative

commercialization depends on two central elements: (1) the extent to which intellectual property can

effectively be protected and (2) the distribution of complementary assets and the costs of building up

these assets.

IP protection. In a strong appropriability environment with enforceable intellectual property rights, the

innovators gain more from their innovation (Teece, 1986). Property rights can be traded on markets

and reduce the risk of expropriation. This reduction of risk is important, since releasing pre-contract

data may force the innovator to share valuable proprietary information, which makes it more likely

that competitors may discover and copy sensitive research-and-development information. The problem

of information disclosure can be amended when well-defined enforceable patents are available. Using

the incomplete contracting framework (Hart & Moore, 1990), Merges (1999) highlights that in a

strong appropriability environment with precise patents, transaction costs are reduced, which helps

increase technology trading. Empirical studies provide evidence for the importance of IP protection in

supporting cooperative commercialization. Arora & Gambardella (1998) report that there is a well-

functioning market for technology in chemical processes and engineering services. Gans et al. (2002)

find that the probability of cooperation increases with the innovators control over intellectual property

rights. In a recent study, Gans et al. (2008) report that the date of a patent grant raises the probability

of closing a licensing deal.

Access to complementary assets. The distribution of ownership and control over specialized

complementary assets is another determinant of commercialization strategy. When specialized


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complementary assets are controlled by other players, the innovator generally gets a smaller share of

the created value (Teece, 1986). The difficulty of acquiring complementary assets may suppress the

market entry of a product by increasing the attractiveness of technology trading. If specialized assets

are costly to acquire or even owned by the rival, a firm will probably prefer cooperative

commercialization as opposed to in-house expropriation. An effective market for technology trading

supports complementarities between firms and moves away from the long-time dominant paradigm of

integration. In contrast, if the firms capabilities to provide these assets internally are superior to those

of its rivals, the firm will surely favor an integration strategy.

The basic premise of the present paper is that the institutional system in which managers are

embedded impacts the role that IP protection and access to complementary assets play in shaping a

companys commercialization choice. In the following, we first review the literature on institutional

systems and then present our rationale with regard to the commercialization strategies that companies

develop.

Institutional Context and Decision-Making

Institutional Embeddedness and Economic Systems

Uzzi (1997, p. 1) refers to embeddedness as being a puzzle that, once understood, can furnish tools

for explicating not only organizational puzzles but market processes. In each society there are

political, judicial, fiscal and other regulatory norms that shape organizational behavior (Hollingsworth,

2000). Hence, variations in national institutional systems are assumed to affect various processes that

take place in organizations (e.g., North, 1990; Whitley, 2002). The idea that it is possible to study

systems unites two traditions. The first is the view of the embeddedness of economic action, which

was introduced by Granovetter (1985) and inspired a large number of studies (e.g., DiMaggio &

Powell, 1991; Uzzi, 1997). The second is the perspective of distinct institutional frameworks that

coordinate economic action (e.g., Nelson, 1993; Hall & Soskice, 2001). The underlying idea of these

traditions is that distinct predictable and understood structures shaping economic exchange emerge as

responses to societal conditioning (e.g., Redding, 2005). While scholars agree that institutions

matter, the question of how they matter remains to a large extent open (Deeg & Jackson, 2008). In


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this paper, we refer to the country as the context and analyze the influence of country-specific

systems on companies strategic decision-making.

The Liberal Market Economy and the Coordinated Economy

The literature on national systems of innovation (Lundvall, 1992; Nelson, 1993) and the varieties-of-

capitalism perspective (Whitley, 1999; Hall & Soskice, 2001) emphasize the heterogeneity among

institutional arrangements across countries. Economies differ as to the extent to which non-market

institutions, e.g., the government, are involved in the coordination of economic behavior (Scott, 2001).

According to the varieties-of-capitalism perspective, there are two major alternative economies, the

liberal market economy and the coordinated economy (e.g., Whitley, 1999; Hall & Soskice 2001).

Whereas liberal market economies (e.g., the US and the UK) operate along roughly laissez-faire

principles, coordinated economies (e.g., Germany and Japan) are comfortable with non-market (i.e.,

governmental) forms of resource allocation (Luk et al., 2008). Overall, government intervention is

much less common in market economies than in coordinated economies (Hoffmann, 2004; Casper

& van Waarden, 2005). In market economies, there is little coordination of market relationships and,

overall, state intervention in the economy is limited to setting rules that support competition. In

contrast, the states role in coordinated economies is so strong that much of the institutional fabric

retains that influence (Bartholomew, 1997). The main difference between the two economies is the

extent of formal regulation and the importance of non-market institutional structures, which influence

key institutional features: the legal system, labor market, company law and the financial system (e.g.,

Whitley, 1992; Casper 2000, Casper and Waarden, 2005).2

In the following we present differences

between the two types in the orientation of these key institutional features, and relate them to the UK

and Germany, which serve respectively as prototypes of market economies and coordinated

economies.

Legal System

From a regulatory perspective, the two types of economies originate from two quite different

traditions: coordinated economies are closely related to civil law, whereas market economies to

common law. La Porta et al. (1999) argue that English common law sprung from the Parliaments


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efforts to protect the citizenry against the sovereigns power. In contrast, the French and German

systems of civil law developed as means of legitimizing the power of the sovereign as chief architect

of the political and economic life. Thus, there is greater protection of the individuals property rights

in common law than in civil law countries (La Porta et al., 1999), although regulation is much denser

in a coordinated economy.

Labor market

A key distinguishing feature of the market orientation of labor markets is the extent to which

companies share authority with industry associations and unions that coordinate and police market

behavior (Hall & Soskice, 2001). Whereas the coordinated economy is more strongly coordinated by

these non-market institutional structures, the liberal market economy emphasizes individual wage

bargaining, allowing fast employee turnover and mobility. Streek (1997) argues that this results in

lower labor mobility in Germany than in the UK. Since human resource competencies are more long-

term and cannot be shifted quickly, firms in a coordinated economy are limited in their ability to

quickly adapt to changes in the environment.

Company law

Whereas the liberal market economy is shareholder-oriented and has a corporate law that is primarily

enabling in nature, the coordinated economy is stakeholder-oriented and places much stronger legal

constraints on company organization (Casper, 2000). These two models of corporate governance have

important implications for patterns of company organization. The stakeholder system, for example,

constrains unilateral decision-making and promotes consensus-seeking, which in turn limits a firms

adaptiveness to changes in technology and in market conditions. Franks and Mayer (1995) call the

German corporate governance system an insider-controlled and stakeholder-oriented system. While

UK managers are mainly influenced by stock prices and shareholders, stakeholders control managers

decisions in Germany. British firm managers are appointed to deliver shareholder-defined

performance. Non-delivery leads to their replacement. Due to the German law requiring co-

determination at the corporate level, the members of the supervisory board are shareholders, banks,

and labor representatives. This two-tier board system ensures that managers do not merely take the


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interest of shareholders, but also the interest of various stakeholders into account (Sanders & Tuschke,

2007).

Financial system

Furthermore, in a coordinated economy the financial system is bank-dominated, whereas liberal

market economies are based on the principles of the capital market. Even though the German economy

is, for example, about 1.2 times larger than that of the UK in terms of the gross domestic product, its

market capitalization is substantially smaller (Worldbank, 2007). Moreover, ownership and

concentration of control of publicly traded companies differ to a large extent between the two

countries. In Germany, block holding by other big corporations or families occurs frequently and

reveals a network of interlocking participating interests (Schmidt & Tyrell, 2004). In the UK,

institutional shareholders hold most of the voting rights, and firms are more widely held, with a high

proportion of a firms stock in free float. The banking dominance and stakeholder orientation of the

German system directly influence information disclosure. Whereas insiders such as employees, banks

and interlocking shareholders are well informed, overall information availability and disclosure are

quite limited and rather private compared to the UK.

Hypotheses

The routines and logic of the institutional frameworks in market-based and coordinated economies are

a source of both incentives and constraints for companies embedded in either type of system. How

companies perceive such incentives and constraints leads to a specific market logic, which then

influences the decision-making and, thus, country-specific capacities and weaknesses of firms

(Hollingsworth, 2000). Figure 1 presents our proposed relationship between market-related

determinants, the impact of the institutional system and commercial strategy.

[Figure 1 about here]

IP Protection

As outlined above, it is presumed that the strength of IP protection is positively related to the

likelihood of cooperative commercialization being chosen over independent commercialization.


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However, in a coordinated economy, the high regulation and heavy coordination by non-market

institutional structures are expected to downplay the importance of market-related criteria, like patent

protection, in companies decision-making. With regard to IP protection, the features of the legal

system determine the importance of patents for protecting firms advances. Porta et al. (1999) argue

that common-law countries (market-based economies) give owners stronger protection than civil-law

countries (coordinated economies). For patent protection, this implies that enforceable patents

decrease the risk of an invention being disclosed to a potential collaboration partner and enable trading

on markets. In this context, Lemley and Shapiro (2005) emphasize that uncertainty associated with

litigation implies that patent grants are best characterized as probabilistic rights. Germany, for

example, is the most important venue for patent litigation in Europe. Approximately 60% of all

European patent infringement proceedings are dealt with in German courts (von Meibom & Meyer,

2008). Von Meibom and Meyer (2008, p. 29) argue that this is a result of Germanys ongoing efforts

to balance the patentees interest in obtaining a reasonable reward for its invention [] and the

interests of the general public in the free movement of goods. This statement again reflects the strong

coordinative character of the German system, which we argue decreases the power of patents to

support cooperative commercialization agreements. A recent study by CJA (2006) for the European

Commission shows that the costs of litigation in Germany are much higher than in the UK and

therefore insurance for patent litigation would demand a premium cost for the German patent owner

(being more than twice as high as the insurance for a UK patent). Thus, we presume that IP protection

has a stronger effect in a market-based economy than in a coordinated economy:

H1: The strength of IP protection is positively related to the likelihood of firms choosing

cooperative commercialization over independent commercialization. This relation is stronger

among firms in market-based economies (UK) than among firms in coordinated economies

(Germany).

Difficulty in Building Important Complementary Assets

As already mentioned above, the degree of difficulty in building complementary assets internally is

considered to be one of the main factors that determine a companys opting for or against cooperative


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commercialization. We argue that the impact of this factor is stronger when a firm is free to operate

and not restricted in its organizational maneuvers. In a liberal market economy, firms are typically

less restricted in their maneuvers and activities than in a coordinated economy (e.g., Luk et al.,

2008). In the following, we discuss how non-market institutional structures, with regard to the labor

market, company law and the financial system, downplay the accessibility of complementary

resources as a determinant of commercialization strategy.

In a coordinated economy, the labor market is typically restricted due to i) active labor-market

policy programs, ii) legislation for employment protection, iii) the welfare benefits system and vi) a

centralized system of wage bargaining (Redding, 2005). In particular, a coordinated system with wage

bargaining through strong unions and Employment Protection Legislation (EPL) limits employee

turnover and mobility. Thus, firms are often unable to use the mechanisms of hiring and firing in order

to make rapid changes in the areas of scientific and engineering skills, because they are restricted by

legislation, the power of unions and bargaining conventions. In market-based economies, authority

based on labormarket relationships enables managers to coordinate economic activities in more

flexible ways than contractual arrangements do (Whitley, 1999, p. 73), and so in principle improves

their ability to take market-related considerations of capability-building into account. In addition, the

rigid labor markets in coordinated economies motivate employees to acquire skills which are often

primarily useful with relation to a single firm, while flexible labor markets promote the acquisition of

general, non-firm specific qualifications (Herrmann, 2008; Lange, 2009). However, the ability of firms

to assemble externally or internally teams of highly skilled individuals determines significantly the

degree to which they can change the internal build-up or the external acquisition of capabilities, and

the speed with which this is done.

Moreover, company law puts legal constraints on company organization. Whitley (1999, p.

70) points out that the level of authority-sharing with various interest groups determines the extent to

which managerial decision-making is constrained. The strong involvement of workers and various

interest groups in stakeholder-oriented concepts of corporate governance limits the leeway of firm

managers in coordinated economies. This involvement presumably makes managers less responsive to

changing opportunities with regard to the accessibility of important complementary assets. For


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example, the German co-determination law requires that firms establish staff councils which have

consultation rights with the management over a number of organizational issues (Casper et al., 2005).

In contrast, firm managers in market-based economies are under pressure to put shareholders first and

to constantly reassess market opportunities.

Furthermore, as mentioned above, the financial system in a coordinated economy favors

innovating firms that build long-term organizational competences with business partners and

employees (Whitley, 2002). Whereas, for example, the British system is more outsider-based,

facilitating the rapid reallocation of capital between firms and sectors, the German system is more

insider-based, promoting relatively long-term relationships between banks, families and other

investors and firms (Tylecote & Conesa, 1999; Whitley, 2002). Therefore, a lock-in in the way that

a firm accesses important capabilities (through internal build-up or external acquisition) is more likely

in a coordinated economy than in a market-based economy. In light of the above:

H2: The difficulty with which important complementary assets can be built internally is

positively related to the likelihood of firms choosing cooperative commercialization over

independent commercialization. This relation is stronger among firms in market-based

economies (UK) than among firms in coordinated economies (Germany).

A framework for the interaction of IP protection and complementary assets

In the following, we introduce a four-field matrix to gain further insight into the relationship between

institutional systems, market-related determinants and commercialization decisions. Table 1 shows the

matrix with its central elements: the level of IP protection and the difficulties that innovators have in

developing complementary assets in-house. The cells present four different commercialization

situations. Our matrix is based on the Gans and Stern (2003) framework, which was introduced to

investigate the ventures decision on market entry with regard to the position of established firms.

Whereas the study uses the incumbents contribution to the value proposition through innovation as a

central element, this study uses the difficulty of innovators to develop the complementary assets in-

house. This refinement is necessary, as we do not restrict our analysis to the incumbentventure


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relation, but elaborate on the determinants that make cooperative commercialization preferable to in-

house expropriation.

[Table 1 about here]

Our basic premise is that firms in a market-based economy differentiate more strongly between the

situations that figure in our matrix than firms in a coordinated economy. The likelihood with which

they prefer cooperative commercialization depends on the specific situation. Two obvious and two

ambiguous situations emerge. In a situation where it is neither costly nor complex to develop the

complementary assets internally, but where the protection of the innovation is weak (B), the

framework predicts integration. In contrast, in a situation with difficult internal development of

necessary assets and strong IP protection (C), the innovator will favor cooperative commercialization.

While situations (B) and (C) have well-defined patterns, the remaining fields exert competing

pressures on a firm with regard to its commercialization choice. Whether a firm decides in favor of

cooperative commercialization depends on the presence of mechanisms that support technology

trading. Consider the situation in which it is difficult to provide necessary assets internally and in

which the IP protection is weak (A).3 When choosing the cooperative commercialization strategy, the

innovator risks expropriation by another firm. A cooperative strategy will only be selected if subtle

forces affect the market attractiveness by diminishing the risk of imitation. The amount of publicly

available information and a firms reputation may be powerful forces that induce the trading of ideas.

The more information about a potential partners strategy, financial situation and past business history

is accessible, the more a firm is able to evaluate the threat of expropriation. In addition, in such

outsider-oriented environments, a firms reputation may be of critical importance. If, for example,

sanctions are imposed on those who commit idea theft, e.g. they suffer a loss of reputation as a result,

there is little gain for the potential licensee from capitalizing on the weak IP protection of the

innovator (Gans & Stern, 2003). A licensee will refrain from exploiting a technology supplier if

information about fairness is available and if fairness is regarded as a precondition for technology

trading in the industry. The available literature on the varieties-of-capitalism perspective suggest that a

market-based economy provides a more outsider-oriented system in which much more information


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is publicly available about firms than in a coordinated economy (Whitley, 2002). Furthermore, Porta

et al. (1999) emphasize that in common law countries (market-based economies), accounting is of

higher quality than in civil law countries (coordinated economies). Moreover, the power of

information and reputation is more strongly supported in a system in which intermediaries facilitate

information exchange and trading (Gans and Stern, 2003). Business Angels and Venture Capitalists

can play a crucial role as brokers for ventures and facilitate cooperative commercialization, as they

have repeated interactions with firms in the industry (Hsu, 2006; Robinson & Stuart, 2007). Typically,

these intermediaries are much more present and effective in market economies than in coordinated

economies (Bottazzi et al., 2008).

In the final field (D) with easy development of complementary resources and strong

excludability, both commercialization strategies, in-house and cooperative, may be effective. Here, our

predictions are less clear. However, we presume that compared to situation (B), firms in a market-

based economy might be more likely to prefer cooperative commercialization in such a situation than

in a coordinated economy. As already outlined above, a market-based economy provides a much more

flexible environment for firms than a coordinated economy (e.g., Casper et al., 2005). Compared to

situations where long-term partnerships and strategies prevail, in situation (D), a firm might be more

likely to try a cooperative solution, if this is not binding in the long run and if resources can be shifted

quickly. Thus, we presume:

H3: In situations where

i) IP protection is weakand internal build-up of complementary assets is difficult(A),

ii) IP protection is strong and internal build-up of complementary assets is difficult(C), and

iii) IP protection is strong and internal build-up of complementary assets is easy (D)

firms are more likely to choose cooperative commercialization over independent

commercialization than in a situation where IP protection is weak and internal build-up of

complementary assets is easy (B). This tendency is stronger among firms in market-based

economies (UK) than among firms in coordinated economies (Germany).


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Field of Study and Data

The Biotechnology Setting

The research setting of this study is the bio-pharmaceutical industry. This sector was chosen because

biotechnology is one of the sectors in which cooperative commercialization is regarded as an attractive

means of commercialization (Lerner & Merges, 1998). The development of new drugs is strongly

driven by biotechnology ventures. These firms are responsible for the vast majority of drugs based on

biotechnological methods that are currently in the product pipelines or are already available on the

product market. While a number of these firms have become suppliers in the product market, others

are suppliers mainly to established pharmaceutical firms. McKelvey (1996) argues that the economics

of modern biotechnology can either be a small-firm phenomenon or a complex division of labor,

where the ventures exist in conjunction with public-research laboratories and incumbents.

Sample and Survey Instrument

In 2006 we developed and administered a survey in the British and German biotechnology industries

(see Haagen et al., 2007). We approached bio-pharmaceutical firms located in Germany and the

United Kingdom. Given the heterogeneity of the biotechnology sector, and in order to control for

external effects, only young biotechnology firms active in the bio-pharmaceutical sector according to

the OECD definition (OECD, 2005b) were included in this study. Firms that were not founded in one

of the two countries, firms that are subsidiaries of foreign firms and firms solely offering services or

supplying products without conducting research were excluded. Our sample was identified through

several searches in industry databases (e.g., Biocom, Dechema, Bio Commerce, as well as regional

databases like Erbi, Bio-M) and the Internet. Identified firms were validated against our selection

criteria with the help of biologists and biotechnologists. We ended up with 346 German and 343

British firms that fulfilled the criteria in 2005 and were at least one year old. Each firm received a

personalized letter addressed to the head of management, inviting them to participate in the survey.

Prior to the field stage, we interviewed industry experts from biotechnology associations and firms,

which helped us to design the survey instrument. In addition, 12 pre-test interviews were conducted to

test the questionnaire; this procedure led to some revisions mainly a reformulation of certain


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questions. We decided to conduct face-to-face interviews, since biotechnology firm managers said that

they were reluctant to participate in mail and on-line surveys but were open to face-to-face interviews.

We hired TNS Global to conduct the interviews on a preformatted and tested questionnaire instrument.

Interviews were successfully carried out with managers in 162 German and 118 British firms.

This response rate of 47% for Germany and 34% for the UK provided us with an unusually

comprehensive sample of British and German biotechnology firms. Eighty-nine percent of the German

interviews and 96% of the British interviews were conducted with executive level interviewees.

Eleven German and twenty-three British responses were excluded from this study due to missing

variables. We tested for non-response bias (Armstrong & Overton, 1977) using the date of the

interview to distinguish between early and late respondents. A series of t-tests for independent samples

failed to identify significant differences between early and late respondents, providing evidence that

non-response bias was unlikely to be a problem in this study.

Definition of Variables and Descriptive Statistics

Table 2 presents summary statistics of the variables. Column 2 lists the mean for the entire sample,

Column 3 for the British, and Column 5 for the German sample. Columns 4 and 6 report the standard

deviations for the British and German samples. In Column 7, the results of the test for differences in

means are presented.


Dependent variable

Whether a firm commercializes alone or via cooperative agreements was used as a dependent variable.

The variable cooperative commercialization is a dummy variable equal to 1 if the firm uses

cooperative commercialization (either by licensing or by a marketing or sales partnership), and equal

to 0 otherwise. Within our sample, 66% of the British and 57% of the German firms entered into

arrangements with other firms, which bring their innovation to the market. The Chi2 test does not

indicate any differences between countries when comparing the means of the two samples. Hence, we

do not infer that firms in the British liberal market economy are more inclined to licensing than

firms in the coordinated German economy.


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Independent variables

The level of IP protection was measured by asking the interviewees whether patents protect the

innovation from direct competitors. IP protection is measured on a five-point Likert scale, ranging

from strongly disagree (1) to strongly agree (5). The variable shows a full sample mean of 3.41.

The single scores are 3.48 for British firms and slightly lower, at 3.36, for German firms. In our pre-

test interviews, we learned that this direct measure is the best indicator of the strength of intellectual

property. The interviewees reported that a patent does not automatically mean that the innovation is

sufficiently protected.4

The variable ease of providing important capabilities internally was built as a multiplicative

term consisting of two measures: the ease with which complementary assets can be built internally and

the importance of complementary assets. The latter is used to weight the ease measure. It was

calculated by asking the firm managers to appraise the importance of several assets in generating rents

from their innovation. In this study, we conceptualize the importance of complementary assets as a

formative construct consisting of five indicators (Cohen, Cohen, Teresi, Marchi, & Velez, 1990). The

interviewees were asked to assess the importance of five assets for appropriating value from the

innovation that we had identified as necessary for commercialization in the biotechnology sector.5

The

construct is specified as a summative index (Barclay, Higgins, & Thompson, 1995). The linear sum of

the component scores was created and then divided by the number of items (Cronbachs alpha=0.75).

The mean for the British firms was 3.29, the mean for the German firms 3.10. We applied the same

procedure to build the measure indicating the ease with which complementary assets can be built

internally (Cronbachs alpha=0.70). This formative construct measured how easy it was or would have

been to provide the necessary complementary assets in-house. The scale ranges from not easy (1) to

very easy (5). The mean for the German firms was 2.94, slightly higher than for the British (2.89).

The multiplicative term ease of providing important capabilities internally shows a mean of 9.57 for

German firms and a mean of 9.91 for British firms.

Some variables were included that are known or expected to influence the commercialization

mode, although they are not involved in the hypothesis discussion.


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VC-financed firm. We use the variable VC-financed firm to control whether a firm is VCfinanced before the commercialization decision or not. Hsu (2001; 2006) suggests that venture

capitalists serve as intermediaries, which results in VC-financed firms being more likely to

enter cooperative commercialization than in-house expropriation. Summary statistics show

that 25% of British firms were VC financed at the time of the commercialization decision,

compared to only 21% in Germany.

Product firm. The variableproduct firm has been included in order to control for differencesin the commercialization mode between firms that are mainly active in developing products

(diagnostic devices, therapeutics, and vaccines) and firms that specialize in platform

technology. In both countries, about 60% of the sample firms sell biotechnological products.

Low-price strategy. The respondents were asked to rate on a five-point Likert scale howstrongly the firm differentiates itself from competitors by offering a low-price innovation. We

expected a firm that differentiates itself by a low price to be rather fully integrated. In our

interviews, we learned that these firms try to be independent from (downstream operating)

firms by supplying the market with low-price technology or products. Table 2 shows that a

low-price strategy is more important in Germany than in the UK (GER mean: 2.72; UK mean:

2.39).

Independent firm foundation. We employed the variable independent firm foundation toinvestigate whether the firm had been founded independently, or founded as either a spin-off

(e.g., of a public research institute or firm) or as the result of a merger. Firms that are

associated with another organization from the beginning are perceived to be more likely to

make use of cooperative commercialization than firms founded independently (see Gulati,

1995). Within the full sample, about 61% of the firms were founded as spin-offs or in the

course of a merger (36% are university spin-offs, 15% are research institute spin-offs, 9% are

company spin-offs and 1% were founded in the course of a merger).

Team size. The number of members comprised in a management team has been included toaccount for the effect of team size. It is likely that a firm with more team members prefers a


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full integration strategy to specializing in upstream stages of the value chain. Examining the

number of top-level managers per firm reveals interesting differences. There are twice as

many senior managers in British firms than in German firms. On average, British management

teams consist of 4.3 persons, compared to 2.2 persons in German firms.

Age. Age is measured in number of days from a firms inception to 31/12/2005. In the relevantliterature, different opinions are expressed on the effect of age on the commercialization

mode. Some scholars argue that young firms are more likely to out-license technology than

older firms because young firms are not fully integrated at the outset (e.g., Hsu, 2001). In the

early stages of a firms development, it may be more efficient to rely on a prominent partner

with expertise in the product market to introduce a product into the market than to invest in a

cost-intensive and risky marketing and sales force. Kollmer and Dowling (2004) show in a

recent study that, in contrast to that assumption, the achievement of full integration for

biotechnology firms does not depend on the age of a company. The variable also accounts for

potential time-varying market effects. The average British firm is about 6.6 years old

(median), while the age of the average German firm is 5.9 years.

The bivariate relationships among the independent and control variables are reported in Appendices 1

and 2. Appendix 1 lists the correlations for the German firms and Appendix 2 for the British firms.

Empirical Approach and Instrumental Variables

An issue we want to discuss is the possibly endogenous character of IP protection. The sample firms

might patent for strategic reasons, e.g., to facilitate gains from cooperative commercialization. We

introduced a two-step procedure to take the endogeneity of the variable into account. In the first step,

we regressed the endogenous IP protection variable on all the other independent variables, along with

additional exogenous instruments. The predicted values were then used in the second-stage regression.

We used the following two exogenous variables as instruments for the IP protection variable in the


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first-step regression: first, the field level of IP protection6

is included (see, for example, Cassiman &

Veugelers, 20027; Haeussler, forthcoming), and second, the level ofinnovativeness of the technology

or product. We perceive that innovations with a rather radical character are more likely to be patent-

protected than more incremental innovations. The variable innovativeness is measured on a five-point

Likert scale.8

Multivariate Analysis and Results

Level of IP Protection and Complementary Assets

Table 3 reports the results for the determinants of commercialization strategy separately for the British

and the German firms. A robust binary probit model is used, with the dependent variable being the

probability of cooperative commercialization. Models 1 and 2 contain the control variables for the

British and German samples. The independent variables are added in Models 38. Models 5 and 6

depict the result with the level of IP protection variable being instrumented and Models 7 and 8 report

the marginal effects for the British and German samples.9

A comparison of the models, calculated

using the non-instrumented and the instrumented IP protection variables, demonstrates that the

correction of endogeneity of theIP protection variable does not change the findings on signs, and only

slightly changes the degree of significance of the coefficient of some variables. In the last column, we

examined differences between the British and German samples for each independent variable. We use

a Wald-type test for differences according to Williams (2006).10

In all models, the variable IP protection is significantly related to the commercialization

choice. Firms with a higher level of IP protection are more likely to use cooperative commercialization

than to commercialize alone in both countries. In addition, the results show that the Wald test for

differences between coefficients in the two models is statistically significant, indicating that the size of

the effect is larger for the British firms. At the margins, an increase in the strength of IP protection at

the mean of the other variables increases the likelihood of cooperative commercialization by 0.290 (at

1% significance level) for the British firms and 0.160 (at 5%) for the German firms. Hence, an


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increase in the strength of IP protection implies an 81% higher increase in the probability of British

firms commercializing through another firm than in that of German firms. We also used an alternative

measure to investigate the effect of IP protection. Whether the firm had applied at least for one patent

to protect the innovation was linked to the commercialization decision. We found that 68% of the

German firms and 76% of the British firms had applied for at least one patent to protect the

innovation. The multivariate model (reported in Appendix 4) shows that this alternative IP protection

variable is significantly positively related to cooperative commercialization for the British firms (at

1%) but not significantly for the German firms. The Wald test indicates a country difference (at 1%).

To sum up, both measures for IP protection indicate that, in their commercialization decision, British

firms weight IP protection more heavily than German firms. This provides support for our H1.

Testing the influence of the costs associated with providing complementary assets internally,

we found the difficulty with which important complementary assets are provided internally to be

positively related to cooperative commercialization in both countries. This finding is in line with our

expectations and thus supports H2. An increase in the variable ease of providing important

capabilities internally decreases the probability of commercializing the innovation through a third

party by 0.057 (at 1%) for the British and 0.030 (at 1%) for the German firms. The Wald test indicates

a country difference (at 5% level).

In the models, we included firm-level variables to control for potential sources of unobserved

heterogeneity. The coefficient of the variable VC-financed firm was not significantly related to the

commercialization mode for firms in Germany, and for firms in the UK it was only slightly negatively

significant. In an additional model, we included a variable measuring the intensity with which the

venture capitalist is involved in the commercialization strategy. Here we did not find a significant

effect in either the German or the British model. Whether the object in question is a product or a

technology influences the commercialization in both countries. Products are more likely to be out-

licensed or brought to the market via a partner than a platform technology. As expected, a firm that

strongly differentiates itself from competitors by offering a low price ( low-price strategy) is more

likely to be fully integrating than firms that do not pursue a low-price strategy. However, the effect is


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only significant for the British sample. We controlled for how a firm was founded (independent firm

founding) to account for heterogeneous firm history. The results revealed that being independently

founded influenced negatively cooperative commercialization for the German firms (at 1%) and the

British firms (at 10%). For the German sample, management team size was significantly positively

associated with the probability of cooperative commercialization (at 10%). The variable age was

negatively, but not significantly, related to cooperative commercialization when the independent

variables were included.


Combinations of IP Protection and Complementary Capabilities: Four Fields

In the following, we further elaborate on country-specific differences regarding the impact of market-

related determinants by testing the introduced framework (see Table 1). In doing so, we focus on

combinations of the characteristics of the two central market-related drivers of commercialization

strategy: the level of IP protection and the difficulty of providing internally important complementary

assets. These two central elements define four commercialization situations. Table 4 depicts the

distribution of the sample firms to the four fields. IP protection was defined as strong if the

interviewees strongly agreed and rather agreed that their patents protected the innovation from

direct competitors.11

We split whether important complementary assets are easy or difficult to develop

internally at the median of the full sample.


The four field variables were coded as dummy variables. The situation in which a firm is faced with

weak IP protection but with no difficulties in providing important complementary assets internally (B)

serves as the reference case. We assumed that in this situation, a firm will most likely choose to be

fully integrated in order to commercialize alone. External commercialization would force the

innovator to disclose sensitive information without adequately protecting the innovation. However,

risking hazardous appropriation by another firm is not necessary since the complementary assets can

easily be provided internally. In Table 5, the results of the robust probit models are reported. Columns

2 and 3 list the estimated coefficients and Columns 4 and 5 the marginal effects.12

First, we turn to the


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results of the situation where the innovation is strongly protected by patents but where it is difficult for

the firm to provide important complementary assets internally (C). As hypothesized, the results

provide evidence that in this situation, the German as well as the British firms choose cooperative

commercialization. The coefficients in both samples are highly significant. Turning from the base case

to Situation C, we see that the probability of cooperative commercialization increases by 0.361 in

Germany and by 0.549 in the UK. The Wald test indicates that the effect is strong for British firms,

which supports H3i (at 10%).

Let us now examine a situation that is difficult for any innovating firm: the innovation is

weakly IP-protected and important complementary assets are difficult to provide internally (A).

Although cooperative commercialization might allow the firm to gain from the innovation without

costly and risky investment in downstream assets, entering a cooperative agreement is accompanied by

the threat of expropriation. When we turn from the base case weak IP protection and ease of

providing important complementary assets (B) to the situation with weak IP protection and

important complementary assets being difficult to provide (A), the coefficient is only positive and

significant for British firms. Hence, there is evidence that in such a situation cooperative

commercialization is more attractive for British firms (Wald test for difference at 1%, see our H3ii).

Finally, we consider a very favorable situation for biotechnology firms in which the innovation is

strongly IP-protected and important capabilities are easy to provide internally (D). The results suggest

that in this case, too, the British firms prefer cooperative to independent commercialization (1%

significance), whereas we do not see a significant effect in the case of German firms. The Wald test

for difference (7.42) indicates significant differences in the coefficients among the two samples (our

H3iii).

All in all, we find that firms in the British market-based economy attach more importance to

the situations that emerge from a combination of the level of IP protection and the difficulty of

building important complementary assets internally than firms in the German, coordinated economy.

This supports our proposition H3.



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Discussion and Conclusion

Today, a growing number of companies specialize in the generation of ideas. These companies use

cooperative commercialization in order to profit from their innovation. Given the increasing

importance of cooperative commercialization, there is a need to investigate how firms decide whether

to build a novel value chain or to leverage an existing one. In this paper, we analyze the determinants

of the commercialization decision and relate them to country-specific institutional frameworks. We

build on the institutional perspective, which suggests that strategic actions taken across nations may be

a function of differences in the existence, saliency, and intensity of particular institutional

arrangements (Hitt et al., 2004, p. 174).

Discussion of Results

According to the institutional systems literature, there are two major alternative economies which vary

with regard to their market orientation, the liberal market economy and the coordinated economy

(e.g., Whitley, 1999; Hall & Soskice, 2001). How incentives and constraints are perceived in these

economies leads to specific market logics of societies. One might expect their actors to use different

commercialization strategies. However, our results suggest that both the fully-integrated firm strategy

and the cooperative commercialization strategy are adopted by companies in both countries to

approximately equal degrees. At first, this appears to imply that economic systems play a purely

passive role in constraining the choices of decision-makers. However, our analysis reveals that

decision-makers do not rely on the determinants that govern the commercialization decision in the

same way. The purpose of this paper is to determine whether such differences in decision-making exist

and, if so, whether they can be explained by differences in economic systems.

We found that a firm is more likely to opt for cooperative commercialization if (1) the

innovation is patent-protected and (2) the firm faces difficulties in providing important complementary

assets internally. While the main effects exist in both countries, economic institutions apparently

influence the degree to which these criteria are relied on in the process of decision-making. We found

that both central elements of commercialization (Teece, 1998), i.e. IP protection and the investment

costs associated with the provision of capabilities, have a significantly stronger influence on the


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commercialization decision of companies in the British market economy than in the German

coordinated economy (our H1 and H2). We reason that the differences in company law, more

specifically in patent litigation, between market-based and coordinated economies are what

mainly impacts the importance of IP protection for the commercialization choice. In addition, we

argue that the influence of non-market institutional structures on the labor market, company law and

the financial system constrains a firms flexibility, and thus downplays the accessibility of

complementary resources as a determinant of commercialization strategy.

In a further analysis, we examine whether the combination of the two central elements

shapes the strategy of the firms in a market-based economy to a larger extent than in a

coordinated economy. Analyzing the situations that emerge from a combination of the level

of IP protection and the investment costs for providing important capabilities internally, we

found that the British firms are more strongly guided by these situations than the German

firms (our H3).

Theoretical Implications

In this study, we have compared and contrasted the commercialization choices of companies in

market economies and coordinated economies. More specifically, we contrasted the different

institutional ecosystems, presented our hypotheses, and tested how the differences we identified

influence the strategic decision processes of firms. While most other studies relate the strategy

outcome to institutional settings, we followed Hitt et al. (2004) and Zacharakis et al. (2007) and

investigated country-specific patterns in how firms reach their decisions and the criteria they take into

account in the process. The results support the institutional perspective by revealing that there are

differences in the degree to which firms rely on market-related criteria depending on the market

orientation of the systems in which they are embedded.

We further extend the varieties-of-capitalism perspective. Previous studies based on the idea

of two major alternative economies have concentrated on how differences in these institutional

systems generate different incentives for firms to pursue either radical or incremental innovations


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(e.g., Casper, et al., 2005). However, this study is the first to test whether the embeddedness of a firm

in a liberal market economy or a coordinated economy impacts the extent to which it weights

market-related criteria in strategic decisions. In addition, while previous studies in this field have

relied upon case studies representing different countries and historical eras, this study uses a

multivariate approach based on firm-level data and thus follows the demand of numerous researchers

for a quantitative multi-level approach (e.g., Davidsson and Wiklund, 2001; Sorenson, 2007, Luk et

al., 2008). We find that, in a system which favors the free play of market forces, organizational

behavior is more strongly guided by the criteria of market attractiveness compared to a less market-

oriented system. In other words, in a coordinated system, a cooperative commercialization strategy is

not selected simply because it outweighs the costs of introducing an innovation into the product

market on ones own. The various non-market coordinating mechanisms in a coordinated system leave

their mark on the strategic decision-making of firms. Effective strategy-making is a fundamental

aspect of entrepreneurial behavior and a necessary precondition of entrepreneurial firm growth and

international competitiveness. While growth is not guaranteed if firms take into consideration all

criteria and all information relevant to their decision, ignoring or downplaying the importance of such

criteria tends to have a negative effect on firm growth.

Furthermore, this study substantiates the literature on the determinants of cooperative

commercialization. Previous studies have shown that the level of IP protection (Gans et al., 2002),

cost-effectiveness considerations (Gans et al., 2002; Aggarwal & Hsu, 2008), and VC financing (Hsu,

2001; 2006) determine the commercialization of technology. In this study, we add the level of IP

protection and cost-effectiveness considerations to this list and also show that the importance which

firms attach to these criteria depends on the institutional system in which they are embedded.

Moreover, this study demonstrates that the situations that emerge from combining the two

determinants provide interesting insights into the decision-making and market orientation of firms.

Practical Implications

The results have important implications for public policy, ventures and venture advisors. This research

is relevant to public policy since only the precise understanding of the interplay between country-


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specific patterns and market-related forces opens up avenues for effective policy-making. There has

been a long-lasting debate among interest associations in Germany whether to expose more business

areas to market forces or to relax non-market restraints (e.g., labor market). The parties arguing in

favor of market coordination point to the effectiveness of market forces, whereas the opponents fear

that social stability will be affected in a negative way by pure market coordination. The business

owners and managers of firms strongly demand the transfer to a more market-based system, which

would give them greater latitude. In particular, the whole public debate centers on formal rules and

laws that bind the actions of firms. However, the findings of this study suggest that even in areas

without explicit restrictions, market-level determinants are less important than in liberal market

economies. Hence, formal regulations and laws do leave their mark on informal rules that influence

strategic choice.

At this point, we want to emphasize that our study does not yield clear-cut implications for

public policy, with relation to the economic impact that the differences described above have on

market orientation. While some scholars implicitly assume that more market-oriented means more

developed and leads to superior performance, this assumption is untested (see Nelson, 2002; Krahnen

& Schmidt, 2004). It might be true that managers decision-making is more successful if it is

consistent with the logic of the institutional country-specific arrangement. However, testing this

assumption has to be left to future research.

For biotechnology ventures and their advisors, the results imply that differences in the

importance of market-related determinants can be traced back to national antecedents. Although the

findings do not provide insights into whether market-force determination is consistently favorable, the

results might be thought-provoking for firms in coordinated economies that target international

markets.

Limitations

As with any empirical study, this analysis and its results come with some caveats. First, the measures

may not represent the concepts correctly and may suffer from subjectivity. To address this issue, we

interviewed industry experts in the design stage of the study and ran an extensive number of


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alternative specifications, all of which indicated robustness. Second, the variable IP protection may

be endogenous. To elaborate this issue, we applied an instrumental variables procedure as well as

alternative measures, which suggest the core effects to be robust.

Finally, we address the issue of generalizability. Caution must always be exercised when

extrapolating results from a single industry. The biotechnology industry is a prominent example of a

very dynamic and highly collaborative industry. While we believe that the main processes do operate

in other contexts, researchers should take industry specifics into account.

Avenues for Future Research

This analysis provides many avenues for future research. Because much work remains to be done to

fully understand the effect of institutional arrangements on the strategic choices of firms, we list only a

few ideas which directly arise from the findings. First, with regard to specific countries, we feel that it

would be very useful to investigate whether a context-specific system of organizational decision

making is influenced by globalization forces and, if so, how. Second, we would welcome research that

examines in greater detail whether conformity to institutional norms in decision-making pays off or

even quantifies this phenomenon. Future research could also identify whether firms that target diverse

markets (for example, in terms of size and level of competition) choose heterogeneous

commercialization modes in different settings. For coordinated economies, it would be worthwhile

to know whether firms that seek to generate profits in the large international market pay greater

attention to the key elements of markets than firms that focus on home or niche markets.

As the commercialization decision directly impacts the extent to which a firm is able to profit

from its innovation, it lies at the core of firm strategy. We hope that, by identifying how institutional

arrangements influence and shape commercialization strategy, this study will provide a useful

contribution to the relevant body of theory, and helpful practical insights into how firms decide on a

specific mode of commercialization.


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Tables

Table 1. Four-field matrix of commercialization

Internal development of important

complementary assets

Difficult Easy

IPp

rotection

Weak A Ambiguous

situation

B In-house

Strong C Cooperative

commercialization

D Ambiguous

situation

Table 2. General characteristics of the sample

Variable Full

sample

(n=246)

German firms

(n=151)

British firms

(n=95)

Test for

differences in

means

Mean Mean Mean Mean Std.Dev.

Cooperative commercialization (d) 0.61 0.57 - 0.66 - P=0.143

Level of IP protection 3.41 3.36 1.43 3.48 1.17 P=0.757

Ease of providing important

capabilities in-house

9.70 9.57 4.76 9.91 5.24 P=0.599

VC-financed firm (d) 0.23 0.21 - 0.25 - P=0.381

Product firm (d) 0.61 0.62 - 0.61 - P=0.933

Low-price strategy 2.59 2.72 1.38 2.39 1.30 P=0.066

Independent firm founding (d) 0.39 0.39 - 0.38 - P=0.853

Team size 3.02 2.20 1.27 4.32 2.62 P=0.000

Age 8.89 7.44 5.99 9.64 8.64 P=0.019

Last column: unless otherwise specified, the Mann Whitney test has been used.

If then Chi2 test, if then t-test.


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Table 3. Probit models to predict commercialization mode


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Dependent variable Cooperative

commercialization

Cooperative

commercialization

Cooperative commercialization

with IP protection instrumented

(1) (2) (3) (4) (5) (6)

Independent variables Germany UK Germany UK Germany UK

Level of IP protection 0.185** 0.656*** 0.403** (I) 0.864*** (I)(0.084) (0.170) (0.162) (0.259)

Ease of providing important -0.086*** -0.182*** -0.076*** -0.170***

capabilities internally (0.027) (0.036) (0.027) (0.040)

VC-financed firm (d) 0.092 0.015 -0.075 -0.677 -0.143 -0.675*

(0.297) (0.358) (0.310) (0.425) (0.294) (0.398)

Product firm (d) 1.023*** 0.296 0.906*** 0.964** 0.758*** 0.938**

(0.246) (0.329) (0.255) (0.449) (0.277) (0.427)

Low-price strategy -0.080 -0.228** -0.076 -0.330** -0.057 -0.317**

(0.084) (0.113) (0.088) (0.136) (0.088) (0.142)

Independent firm founding (d) -0.687*** -0.473 -0.679*** -0.685* -0.682*** -0.681*

(0.237) (0.309) (0.250) (0.381) (0.248) (0.369)

Team size -0.088 0.059 -0.122 0.031 -0.156* 0.017

The Determinants of Commercialization Strategy in UK and Germany

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