Clustering Biotech: A Recipe for Success? Spatial Patterns of Growth of Biotechnology in Munich, Rhineland and Hamburg

Clustering Biotech: A Recipe for Success? Spatial Patterns of Growth of Biotechnology in Munich, Rhineland and Hamburg

Christian Zeller

Small Business Economics

17: 123–141, 2001. 2001 Kluwer Academic Publishers. Printed in the Netherlands.

ABSTRACT. The dynamic growth of biotechnology inGermany in recent years has an obviously spatial pattern.Some regions show a substantial potential for start-ups andyoung firms of this new industry whereas others lag behind.The paper is discussing this unequal spatial developmentelaborating perspectives which derive from recent debatesabout regional innovation systems. The biotech regionsMunich and Rhineland, both winner regions of the BioRegioCompetition are described and compared with the situationin Hamburg where biotechnology is much less important. Weanalyze the degree and relevance of locally integrated input-output relations of innovation systems based on typologies ofthe wide range of firms within the biotechnological valuechain and the forms of co-operation. Moreover, a qualitativeestimate is given with respect to the significance of untradedrelationships and regional knowledge spillovers. Factorsfavoring local integration are compared with those favoringinput-output systems on a transatlantic scale. The paperdiscusses the question whether the biotech industries in theregions of Munich, Rhineland and Hamburg represent identi-fiable regional systems of innovation. Our findings show thatthe spatial concentration does not necessarily imply a closenetwork of input-output relations within a cluster. Knowledgeand technology transfer often happens on a international,mostly on the North Atlantic scale. The exchange of tacitknowledge, however, is facilitated by spatial proximity. Thisunderlines the importance of untraded relations and “relationalassets” in a region. Political and institutional support forbuilding a “business community” can reduce barriers to launchrisky commercialization processes.

1. Introduction

The remarkable rise of biotechnology is markedby spatial concentrations. The wave of successfulcommercialization processes and intensifiedresearch and development resulted in a fast dif-ferentiation into many different technologies andapplications. Of greatest economic importance arenew pharmaceutical products as a result of thediscovery of new active substances and newtechnologies such as genomics and gene therapy.These innovation processes are organized bypublic research centers as well as small biotechfirms and big pharmaceutical multinationals.

Regional motors of an economic use of biotech-nological knowledge can be found in the U.S.,especially in the Bay Area and the Boston region.But biotechnology has been a very dynamicindustry in Germany, too. According to the latestmarket observation the number of companiesincreased from about 150 in 1996 to 279 in early2000. Most of the European start-ups in this sector,the highest share of specialized biotechnologyfirms and the second highest number of employeesare located in Germany (Schitag and Ernst &Young, 1998; Ernst & Young, 1999; 2000). InGermany, biotechnology companies are agglom-erated in a few regions such as Munich, the upperRhine, Heidelberg and Mannheim, Frankfurt, themiddle Rhine, and Berlin.

The BioRegio Competition is often mentionedin order to explain the recent dynamics. In orderto promote the commercialization process ofbiotechnology the Federal Ministry of Education,Science, Research and Technology (BMBF)proposed this competition in 1995 and askedregions to compete against each other using

Final version accepted on November 15, 2000

Arbeitsbereich WirtschaftsgeographieInstitut für GeographieUniversität HamburgBundesstr. 5520148 Hamburg, GermanyE-mail: [email protected]

regional concepts of biotechnological specializa-tion (BMBF, 1996). In November 1999 the BMBFextended this strategy, launching the BioProfileCompetition (BMBF, 1999, 2000).

These initiatives reinforced the promotion ofapplied research and commercialization on astate level by encouraging regional actors andresources. The development of biotechnologyconcentrated in a few regions and the major roleof globally active pharmaceutical companiesunderlines the challenge of understanding thespatial dimension of the organization of biotech-nological input-output systems. This contribution1

analyzes the degree and relevance of locally inte-grated input-output relations based on typologiesof biotech firms and their forms of co-operation.The paper evaluates the question whether thisindustry is organized in identifiable regionalsystems of innovation (as defined by Cooke, 1998;Howells, 1999). It argues that a dynamic compre-hension of scales of innovation systems needs tobe developed in order to reveal the spatially andorganizationally highly selective concentrationprocesses of technology and knowledge produc-tion in biotechnology.

2. Regional innovation systems and the 2. selective globalization of technology

The unequal spatial development, regional differ-entiation and new scales of production and inno-vation systems are important characteristics of theworld economy. The existing literature on theregional variation of technological change andeconomic competitiveness offers a wide range ofexplanatory concepts. These explanatory conceptswere discussed in debates on new industrialregions and technology districts, national andregional innovation systems and the path depen-dency of technological and regional developments.

Regional specialization and “techno-globalism”

The discussions on “flexible specialization” (Pioreand Sabel, 1984), “new industrial spaces” (Scott,1988; Saxenian, 1994), “technology districts”(Storper, 1992), “input-output systems” (Storperand Harrison, 1991) and various forms of “indus-trial districts” (Markusen, 1996) delivered new

insights into the remarkable growth of certainregionally integrated industrial districts and newindustrial regions. Yet it is obvious that the “new”as well as many ‘mature’ industrial regions gothrough a process of successful renewal linkedwith a strong restructuring of the dominantindustry (Gray and Parker, 1998). Further criticismwas referred to the underestimation of multina-tional companies, the concentration of capital andoligopolistic conditions (among others Amin andRobins, 1990; Martinelli and Schoenberger, 1991;Amin, 1992; Amin and Thrift, 1994; Harrison,1994). Sternberg (1995, p. 165) emphasized theimportance of international R&D cooperationscausing remarkable disadvantages to locallyoriented companies. He also emphasized the inter-nationalization dynamics of industrial districtsduring the maturing process.

An analysis of the development of biotech-nology show the limits of the approaches men-tioned above. Parallel to the spatial concentrationof biotech firms in a few regions there is atendency towards the creation of global innova-tion relations. The multinational pharmaceuticalcorporations acquire biotechnological know-howon a global level and tie innovation networks onnew scales (Drews, 1998). Access to and controlof technology became a central factor in interna-tional competition. Despite a great variety theprocesses of “techno-globalism” (Archibugi andMichie, 1997) are going on spatially and organi-zationally extremely selective (Chesnais, 1997;Ruigrok and van Tulder, 1995; Zeller, 2001a).

Innovation systems and their fuzzy spatialorganization

Spatially-oriented innovation research offersimportant insights for the investigation of inno-vation systems in biotechnology. The concepts ofinteractive learning processes focus on the relationof different actors and complex forms of interac-tion (Kline and Rosenberg, 1986; Lundvall, 1988;Feldman, 1994). In general, innovation can beunderstood as the search for and the discovery,experimentation, development, imitation, andadoption of new products and productionprocesses as well as of new organizational forms.Therefore it is a fundamentally uncertain processto solve problems linking private with public

124 Christian Zeller

knowledge (Dosi, 1988, p. 222). In this senseinnovations comprise a broad field of social andeconomic institutions and connections in a regionmaking up the technological infrastructure. Thisinfrastructure promotes knowledge transfer, helpsto solve problems, reduces the costs of innovationsand creates innovation capacities or core compe-tences of certain technologies and industrialsectors (Lundvall, 1988).

Following Dosi (1988, p. 222) and Feldman(1994, pp. 22–27) we examine the importance ofa regional integration of innovation systems bymeans of a few features:

• The existence of external economies of scaleand scope, especially the pooling of specializedlabor market and other factors of production(Krugmann, 1991).

• The clustering of innovations is related to theexistence of R&D-institutions of universitiesand firms in a region as main centers of knowl-edge creation (see Feldman, 1994, p. 18;Feldman and Florida, 1994, p. 214). Thelocation of research institutions is playing a sig-nificant role for the development of a regionalinnovation system (personal contacts, spin-offs,research cooperation, learning by doing, spe-cialized labor market). These are indispensibleprerequisites for the development of biotechclusters. In this respect information spilloversare of particular importance. On the other handit is by no means sure that regions disposingof a good science base will develop into biotechregions (Storper, 1997, p. 16).

• A reduction of insecurity may enable research-based companies to start different forms ofcooperation, exchange information and buildinnovative networks (Saxenian, 1994). It is pri-marily the insecurity in connection with thedevelopment and use of new technologies thatoffers an incentive to firms to agglomerate(Lundvall, 1988, p. 355). In the case of biotech-nology risk management may be very impor-tant.

• The increasing complexity of innovationssuggests that related industries and specializedbusiness-oriented services are importantsources of information and input. The conceptof interactive innovation presupposes a lot ofinformation, a variety of decisions and possi-

bilities of different actors coming together tofacilitate commercialization (learning by inter-acting).

• Aspects of knowledge are “tacit”. They cannotbe codified and transferred with blueprints andinstructions. Such knowledge needs to beacquired by concrete practice and direct socialcontacts (Nelson and Winter, 1982; Howells,1998). Therefore experimentation in the formof learning by doing and learning by usinggains a particular importance. “Tacit knowl-edge” which cannot be completely codified andtransferred facilitates the clustering of innova-tions. Necessary expertise can come fromrelated industries, customers and suppliers.Audretsch and Stephan distinguish knowledgeand information and assume that the costs oftransmitting information are invariant todistance but the costs of transmitting knowl-edge and in particular tacit knowledge increasealong with distance (Audretsch and Stephan,1996, p. 2).

• Technological change is not only a reaction tochanges of market conditions but is alsoinfluenced by technologies already used.Technological progress is only possible forfirms, organizations and countries on the basisof the technological level already achieved. Inthis sense technological change must be under-stood as having a cumulative nature.

These factors let us expect that the spatiallyconcentrated firms develop close relations. Studieson the biotech industry, however, suggest thatthere is a close cooperation among biotech firmsand with big pharmaceutical companies, but notin a regional context. In view of the many transat-lantic cooperation agreements between Europeanpharmaceutical companies and U.S. biotechfirms it is not astonishing that an internationaltechnology transfer in the field of biotechnologyis of particular importance (see among othersPisano, 1991; Dibner and Bulluck, 1992; Valleand Gambardella, 1993; Sharp et al., 1994;Dolata, 1996; Powell, 1996; Cavalla, 1997). Thecentral problem of technology transfer withinand between multinational companies and thecooperation with partners is how tacit or uncodi-fied knowledge can be transferred (Howells,1998).

Clustering Biotech 125

In view of the extremely unequal geographicaldistribution of innovative activities the question ofthe spatial and organizational unit and of the scalesof innovation processes arises. The evolutionaryeconomists focus on the dynamics of nationalinnovation systems (among others Lundvall, 1988;1992b; Freeman, 1995). The internal organizationof firms, the relations between firms, the role ofthe public sector, the institutional setting of thefinancial sector as well as the intensity andorganization of R&D are considered to be thekey elements of national innovation systems(Lundvall, 1992a, pp. 4–5). They are a set ofinstitutions whose interactions determine theinnovative performance of firms (Nelson andRosenberg, 1993, pp. 4–5).

Howells (1999, p. 72) transfers this approach tothe regional level. The regional governance struc-tures, the long-term development of regionalindustrial specialization and core/periphery dif-ferences in the industrial structure and innovativeperformance are the most important dimensionscharacterizing regional innovation systems.Indeed, a company is confronted with very dif-ferent geographical levels of its own innovationsystems. Moreover, the geographical layers ofnational, subnational, regional and local innova-tion systems overlapping sectoral layers or sectoralsystems of innovation need to be considered. Asdebates on “new industrial spaces” and “flexiblespecialization” show regional innovation systemshave their own specific internal logic. They areimportant arenas of localized learning and ofexchange of tacit knowledge. The impact of glob-alization will not entail a direct erosion of regionalinnovation systems, it will rather lead to anadditional spatial unequality (Howells, 1999,p. 87).

Path dependency of technological and regionaldevelopment

The differences between biotech regionsraise questions of the evolutionary dynamics.Evolutionary economics not primarily interestedin spatial and regional questions provided anapproach helping to understand technologicaldevelopment paths (Nelson and Winter, 1982;Dosi et al., 1988) with special consideration ofhistory, routines, environmental influences and

institutions. The concept of a path dependency isbased on the assumption of positive cumulativemechanisms facilitating or impeding technologicaloptions. Strong effects of the persistence of anindustrial structure are opposing the fundamentalchange of locational conditions (Lundvall, 1988,p. 356). In this sense local technological changescan be understood as an evolutionary path whereevery step forward moves in a direction whichcannot be reversed and future options are limited(Nelson and Winter, 1982; Storper and Walker,1989, p. 113).

In the context of regional and industrial devel-opment paths the question is whether new indus-trial sectors primarily develop in new growthregions or in mature industrial regions. Theanalysis of the pharmaceutical and biotechindustry provides a contradictory picture. Thebiotech industry is located in proximity to leadinguniversity research institutions in the regions ofBoston, San Francisco and San Diego, but also inNew Jersey where a strong pharmaceuticalindustry exists. Remarkably, activities of biotech-nological production are more important in NewJersey than in the research-based “new spaces” inCalifornia. Also “mature” regions can hold theirposition in international competition because ofthe expertise related to the industrial activities(Gray and Parker, 1998).

To clarify the question of path dependencyStorper (1997) integrated different approaches inthe context of his new heterodox paradigm suchas the Californian “new industrial spaces” and the“evolutionary economics” to a “holy trinity” oforganization, region and technology whose inter-action must be enlightened. In his plea for a newconcept of regional innovation systems Cooke(1998, p. 15) relies on similar bases and attachesimportance to the regional variations of gover-nance structures. Therefore it is of particularinterest how regional governments finance policyand at the same time provide a specific identityto the competing regions. The collective order ofa region is determined by mutual trust within an“economic community”.

Besides material assets relational assets whichare shaped by uncodified knowledge and untradedinterdependencies play a crucial role. Storper(1997, p. 28) interprets the economic process as“conversation and coordination” and the subjects


of the process not as factors but as reflexivehuman actors. In this sense he understandsregional economies as “stocks of relational assets”.

Material and relational assets are intertwined.Without “soft” communication there will be no“hard” cooperation, without an infrastructure ofresearch institutions and research firms beyonda critical threshold there is no diversity of inter-action and no knowledge spillover. A technologycore region can establish itself because it pro-vides a productive basis to the non-cosmopolitanknowledge. But non-cosmopolitan knowledgedoes not necessarily need spatial proximity. Itcan also be settled in a technological or organiza-tional space such as a big multinational corpora-tion and therefore go beyond territorial spaces. Yetregular human interaction is necessary in an inter-pretative and personal community (Storper, 1997,p. 70).

With regard to an understanding of thedynamics of biotechnology these approaches canbe summarized in the following assumption:Biotechnology tends to develop spatially agglom-erated but not necessarily regionally intertwined.Regional innovation relations are overlapped oreven structured by interweavings on larger scales.Knowledge inputs, however, may be embodied inhuman, institutional and facility form. These typesof resources are relatively immobile and place-specific. Therefore they facilitate a regional spe-cialization and represent the starting points ofspecific regional pathways.

Because of obvious spatial concentrations ofbiotech firms we examine whether the analyzedagglomerations are examples of “regional worldsof innovation” in the sense of Storper’s approach(Storper, 1997, p. 42, Figure 2.2). This contribu-tion discusses the embeddedness and network inte-gration of important biotechnological actors intotheir social, political and economic environment,created by competitors, clients, suppliers, consul-tants as well as economic and political institutions.The development process of therapeutics from thediscovery of active substances to the market isillustrated in Figure 3. Value creating activitieswithin one firm or a network of firms are charac-terized by research, development, production andcommercialization of a product. In the context ofbiotechnology quite distinct transactions canrepresent input-output relations such as

• a sequence of activities to produce knowledge,a technology, a product or a service within afirm and between firms;

• the purchase of raw materials, intermediateproducts, production means and services nec-essary for the value creating process;

• the licensing of patent rights; • services to analyze substances.

Different actors pursuing more or less distinctinterests contribute to the emergence of specificinnovative conditions in regions. The companiesorganize sections of the value chain and at thesame time they are part of these regional condi-tions. We can distinguish several groups of actorswhich either hold a key role in biotechnologicalinput-output systems or play an important partproviding a supportive business, political and legalenvironment: biotech firms, supplier firms, userindustries and institutions, institutions of basicresearch as science base, commercialization actorsand political actors. Assuming that complexity andopenness towards innovation processes cannot bedepicted in quantified models we have decided tobase our research on qualitative interviews(Schoenberger, 1991; Healey and Rawlinson,1993; Markusen, 1994).

3. Munich, Rhineland and Hamburg: 3. Specific Development Paths

On the federal state level three political measuresprofoundly shaped the development of biotech-nology in Germany. First, the establishment of thegene centers in Berlin, Heidelberg, Cologne andMunich between 1984 and 1989 initiated by theMinistry of Research and Education as well as theorientation of an increasing number of universityhospitals towards molecular biological activities.Second, the first passing of the genetic engineeringlaw in 1990 and its renewal in 1993. Third, theBioRegio Competition organized by the BMBF(Federal Ministry for Education, Science,Research and Technology) in 1996 (BMBF, 1996;Winnacker, 1998). The BioRegio Competitionfocused on the promotion of biotechnology on aregional level. Since then the regions haveincreasingly been invited to reinforce theirefforts in biotechnology and to develop theirspecific profile. Indeed Munich, Rhineland and


Heidelberg/Mannheim, the winner regions ofthe competition, developed different kinds andinstitutions of biotechnology. The BioProfileCompetition launched in November 1999 extendsthis approach and together with BioFuture andBioChance represents a further biotech promotionpackage in the course of the program“Biotechnology 2000” (BEO, 1998; BMBF, 1999;2000; BioRegio Initiative, 1999).

Munich: Research-based development

In the course of the “Zukunftsoffensive Bayern”(a future offensive for Bavaria) the state govern-ment launched several biotechnology promotionprograms financed by an enormous privatizationof public assets. The location of Martinsried nearMunich gained particular attention in the sense ofa regionalized technology policy under the labelof “strengthening of the strong”. The focus on thelocation of the Munich metropolitan area was toincrease its attractiveness for new biotech firmsand venture capital firms and to induce a multi-plier effect following the example of the biotechclusters in the U.S.A.

The setting up of important institutions of basic

research such as the gene center, the Max-Planck-Institute for Biochemistry and other centerspreceded the commercial promotion of biotech-nology. In the early nineties the formation ofexpertise was initiated in order to push theeconomic development of biotechnology andgenetic engineering. Particular emphasis was laidto regional networking and cooperation. Importantsteps towards the creation of a spatial crystalliza-tion of biotechnological research were the BiotechInnovation and of Start-up Center Martinsried(IZB), the Max-Planck-Institute for Biochemistry,the Clinic Großhadern, the gene center, and theshifting of a large part of the natural sciencesfaculties of the university such as chemistry,pharmacy, biology, medicine and physics toGroßhadern (which is located in the near vicinityof Martinsried).

The IZB built in 1994 and extended afterwardsis of particular importance. It offers laboratoryspace for start-up companies, other useful internaland external infrastructure and facilitates formalcooperation and informal networking activities.BioM AG is a direct result of the BioRegioInitiative and was founded in 1997 to support thebiotech region of Munich. BioM AG raises and


Source: Christian Zeller.

Figure 1. Firms and other actors in input-output systems of pharmaceutical biotechnology.

offers seed capital and coordinates grants of theBMBF. BioM AG offers help to start-up projectsby individual business planning and management,helps to organize contacts with cooperationpartners and gives advice in questions concerningpatents and licensing.

Institutions active in molecular biological basicresearch are decisive starting points favoring aspatial concentration of biotech firms. Universitiesand research institutions build the foundations ofthe science base (Kenney, 1986). In Munich theMax-Planck-Institute for Biochemistry, the genecenter and the Ludwig-Maximilian University(LMU) are among the most important institutions.They have formed a substantial basis for severalfirms founded after 1993. The regional sciencebase is extended by two Fraunhofer-Institutes,GSF-Neuherberge, additional Max Planck-Institutes and the Technical University of Munich.The technology and knowledge transfer betweenthe research institutes and the business sector isorganized by means of direct cooperation, patentlicensing and personal relationships with the com-panies within and outside the region. Companiessuch as MediGene, Connex, Domed, BayKG,Micromet, Microgen, Pulsion and Switch arespin-offs from the LMU, Morphosys, Toplab andSugen Inc. (U.S.A.) are spin-offs from the Max-Planck-Institute.

In the Munich region the pharmaceuticals anddiagnostics company Boehringer Mannheimplayed an important role. Since 1946 BoehringerMannheim has been running important biotech-nological production facilities in Tutzing and inPenzberg since 1972 (Fischer, 1991). Thecompany had more than 2000 employees at bothsites just before the acquisition by the Swisspharmaceutical giant Hoffmann-La Roche in 1997.In Penzberg Hoffmann-La Roche now disposes ofthe largest biotechnological research and produc-tion site in Germany. Already before the take-overby Hoffmann-La Roche Boehringer Mannheimhad invested DM 1.5 billion into the moderniza-tion of the sites in Penzberg and Tutzing. Sincethen Hoffmann-La Roche has integrated theresearch center in Penzberg into its global researchnetworks and has extended it in a massive way. Itis now one of six “centers of excellence” of thepharmaceuticals division with global responsibilityfor the therapeutic area of oncology. Within the

diagnostics division the site is responsible forresearch, development and production in the fieldsof “Molecular Biochemicals” and “HeterogeneousImmunoassays”. The reinforcement of the site inPenzberg employing about 2500 staff members atpresent emphasizes the fact that Hoffmann-La Roche appreciates the resources and qualityof research and is making any effort to be intouch with the biotechnological potential inthe Munich region (Humer, 1999; Hoffmann-La Roche Magazin, 2000, p. 6). BoehringerMannheim signed a broad range of agreementswith universities and research institutes in theregion. As the most important employer inbiotechnology Hoffmann-La Roche shapes thelabor market and contributes to the emergence ofspecialists with different qualifications. Hoffmann-La Roche is the most important pharmaceuticalmultinational corporation in the region. In themid-nineties Hoechst Marion Roussel built asmall genomics research center in Martinsriedin the direct neighborhood of the well-knownbiotech company MediGene. Moreover, the multi-nationals SKW Trostberg, Wacker Chemie, Baxter,Fresenius, Serono and Amgen are present in theregion.

Firms in the areas of finance, law and consul-tancy are of great importance in creating an appro-priate biotech-friendly business climate in aregion. We summarize these actors under the termof commercialization actors. There are many insti-tutions supporting the financing of biotech com-panies. International venture capital firms suchas ATLAS Venture GmbH, Techno VentureManagement Gesellschaft mbH (TVM), ApaxPartners & Co. and the Life Sciences VenturesGmbH which settled in Munich in the nineties.Of great importance are also investment firmssuch as Bayerische Kapital Risikobeteiligungs-gesellschaft mbH and the Bay BG, both supportedby the federal state of Bavaria. Procuring venturecapital is a central instrument of the Bavariantechnology policy. Although venture capital firmsrarely base their investments on geographicalcriteria their strong presence influences theorientation of biotech firms. In view of the hugerisks VC-firms invest only in companies providinga credible perspective of an initial public offeringwithin a few years (Kulicke and Muller, 1994).Patent attorneys are another group of indispens-


able commercialization actors. Because Munich isthe location of the German and European PatentAgencies a broad range of specialized knowledgecan be found there. This facilitates the organiza-tion of the legal protection of intellectual propertynecessary for the commercialization process.

Rhineland: Industry induced biotechnology

The building of a gene center in Cologne was alsothe starting-point of the accumulation of biotech-nological competences in Rhineland though thepolitical and economic formation process ofbiotechnology differs from that in Munich. TheBioRegio Rhineland developed from the BioRegioCompetition and comprises locations in Aachen,Bonn, Cologne, Bergisch-Gladbach, Düsseldorf,Erkrath, Hilden and Wuppertal. The BioGenTecNRW, founded in 1994 is the central promotionorganization in North Rhine-Westphalia developedfrom a local biotech promotion initiative inCologne launched in 1991. In the course of theBioRegio Competition the BioGenTec expandedand became the central turntable and motor of theBioRegio Rhineland. It coordinates more specificnetworks such as the Biotech CompetenceNetwork, the Biotech Consulting and CoachingNetwork as well as the Biotech Capital NetworkRhineland and the Bayer-Biotech Investmentfund.A further task consists in the promotion of publicacceptance of biotechnology financed up to 90percent by public means. Promoting biotechnologyNorth Rhine-Westphalia and the BioGenTec wantto press ahead with the structural change of theregion. The industrial base is understood to be anadvantage for the creation of an integrated biotechsector from research to production. The know-howand potential of a specialized workforce in con-nection with the research and production sites ofthe chemical and pharmaceutical industry arepotentials which can be used. Indeed, successfulfirms such as Qiagen, Miltenyi and Rhein Biotechfocus on activities which also comprise importantproduction steps either of devices and instrumentsor of pharmaceutical active substances. A diver-sified biotechnology structure and integratedvalue chains are expected to be of advantage to astable growth of the sector. Although there wereinitiatives for a spatial concentration of biotech-nology in Rhineland, i.e. the Pharma-Zentrum

Köln-Mühlheim and the RechtsrheinischeTechnologie- und Gründerzentrum Köln, researchsites as well as firms are spread over the BioRegioRhineland.

The gene center Cologne, the Institute ofGenetics of the University of Cologne, the Max-Planck-Institute for Cultivation Research, theCenter of Molecular Medicine in Cologne, theHeinrich-Heine University in Düsseldorf, theJülich Research Center and the TechnicalUniversity in Aachen are the major generators ofbiotechnological knowledge in Rhineland.

The multinational Bayer disposes of locationsin Leverkusen, Dormagen, Uerdingen andElberfeld with about 43,000 employees. Themanufacturing of pharmaceutical active ingredi-ents is located primarily at the Wuppertal-Elberfeld site (3,400 employees). The largestpharmaceutical research center of the company isalso located here. After a cautious period Bayerintends to extend the site in Wuppertal and builda second production site for recombinant pharma-ceuticals in addition to the location in Berkeley.Since the acquisition of the pharmaceuticalcompany Nattermann in Cologne in 1988 theFrench multinational Rhône-Poulenc was alsoamong the most important pharmaceutical pro-ducers in the region. The former site ofNattermann in the north of Cologne became theheadquarters as well as the research and develop-ment site of the German subsidiary. In 2000 thesite counted 550 employees (Rhône Poulencmerged with Hoechst to Aventis in 1999). Besidesthese big multinationals some mid-size pharma-ceutical companies such as Grünenthal, MCMKlosterfrau, Schwarz Pharma and Madaus AGmake up the regional labor market and knowledgebase (Stadt Köln, 1999; Aventis, 2000).

Like the structure of the biotech companies thefinancing landscape is quite diversified inRhineland. Five regional capital investment asso-ciations as subsidiaries of local savings banksunited as BTK-network and provided DM 70million. Bayer AG complemented the BTK-network financing the Bayer Biotech Capital Fundendowed with DM 20 million in 1997. TheBioGenTec holds a central position within theBTK financing network. It supports companystart-ups and proposes companies to be financed.The technology program of the Ministry of


Economy, Technology and Transportation includesso-called “lost grants”. The particular role of theregional savings banks in Rhineland is also anexpression of the broad promotion strategy. Thebiotech promotion in Rhineland combines thegoals of the technology policy with ambitions ofregional economic development.

Hamburg: Modest biotech development

The BioInitiative Nord launched as a commonproject of Hamburg and Schleswig-Holstein wasprompted by the BioRegio Competition. Thepromotion activities concentrate on biomedicinebuilding on the application-oriented researchpotential in the region such as the Bernhard NochtInstitute for Tropical Diseases, the Heinrich PetteInstitute for Experimental Virology andImmunology at the University of Hamburg, theUniversity Hospital of Eppendorf, the Institute forHormone and Reproduction Medicine at theUniversity of Hamburg and various institutes atthe universities of Kiel and Lübeck. In 1997 theBioInitiative Office as part of the technologytransfer office of the Technical UniversityHamburg-Harburg took over the coordination ofthe biotech promotion. The successful companyEvotec BioSystems was considered to be a crys-tallization point of a developing biotech landscape.

In addition to Evotec BioSystems GmbHfounded in 1993 and Sequenom founded by a pro-fessor from Hamburg in Boston in 1994 located asubsidiary in Hamburg a year later, about twelvenew biotech firms have been founded in theHamburg, Lübeck and Kiel region since 1996.Probably the most interesting firm is CellTecGmbH which develops methods and active sub-stances based on somatic gene therapy. However,compared to Munich and Rhineland the develop-ment of biotechnology and the impulses by theBioRegio Competition are very modest inHamburg. Motivated by the recent generaldynamics of biotechnology and new growthexpectations the BioAgency AG was founded bythe director of the Institute for Hormone andReproduction, a co-founder of Evotec and theHamburg Chamber of Commerce in early 2000 inorder to reinforce the promotional activities.Similar to BioM AG in Munich BioAgencyprovides seed capital and competent support to

new start-up companies. Although there is nosignificant agglomeration of biotech firms inHamburg, Evotec AG belongs to the most suc-cessful biotech companies in Germany. In mid-2000 the number of employees amounted to morethan 240 an the company is pursuing a veryambitious and aggressive international growthstrategy (see below). This shows that a dynamicregionally integrated growth and a successfulexpansion of firms are different and not neces-sarily linked phenomena of the biotech industry.

Biotech companies: Divers and highly specialized

The patterns of input-output relations are primarilyan outcome of the function of the different com-panies and of other actors in the whole innova-tion system. Based on the principal activities inthe value creating process of therapeutics anddiagnostics we can elaborate a typology whichtakes the core competence of the firm as a centraldistinguishing feature (Figure 2). This typology offirms allows a better understanding of the typicalcooperation agreements which are legal forms ofinput-output relations. Cooperation agreementsalways represent specific forms of division oflabor. An understanding of the spatial pattern alsoallows us to grasp the spatial organization of a partof the externalized input-output relations. Thismethod enables us to describe the spatial integra-tion of major actors in a biotech cluster.

Our research shows that the large majority ofthe firms in Munich is active in the fields of diag-nostics and therapeutics while the spectrum ofcompanies in Rhineland is much more diversified.In entire North Rhine-Westphalia of 44 identifiedcore biotech firms only 25% were active intherapeutics and 7% in diagnostics (Prognos,1997, p. 32). The first biotech companies inRhineland were founded already in the mid-eighties, earlier than in Munich. Indeed the settingup of Qiagen, the biggest company of the sectortook place in 1985. Rhein Biotech emerged in thesame year. Miltenyi BioTec started its business in1989. All three companies are bigger than the mostsuccessful companies in Munich.

An analysis of both biotech regions by meansof the presented typology shows that more com-panies in Munich are involved in the discovery


of pharmaceutical active substances than inRhineland. On the other hand Qiagen and Miltenyiin Rhineland, two companies specializing on theproduction of laboratory instruments, were ableto establish on an international level. The firmstrategy determines also the spatial organizationof input-output relations. Many companies inMunich are dependent on venture capital andtherefore adopt an early transatlantic or triadic per-spective whereas in Rhineland with a differentfinancing situation the growth strategy must notnecessarily be based on venture capital.

Biotechnology as a result of regional conditions

By founding the gene centers, by improving theregulatory conditions and by organizing theBioRegio Competition the federal policy set

important general conditions. Various institutionsdeveloped a specific biotech promotion policy inthe individual federal states and contributed tofurther the initiatives of a federal government. TheBioRegio Competition resulted in an importantimpetus for biotechnology by founding numerouscompanies and by establishing networks withother actors. This was the result of a specificGerman kind of a national technology policyderiving from a deeply rooted federalism thatcontributed to the breakthrough of new forms inthe commercialization of technological innova-tions. Although political actors in both regions arewilling to realize concepts for building “incubator”institutions (Blakely and Nishikawa, 1992), thedifferent development of biotechnology in theregions points out a path dependency. Thereforea connection between the regional economic struc-



Figure 2. Typology of biotech companies.

ture, the related governance pattern and thespecific form of biotechnology can be noticed.

After World War II during a period of catchingup-modernization high tech industry settled in theMunich region fostering a positive climate forbiotechnology as well. Young firms, institutionsof biotech promotion and commercializationactors can profit from a business culture andknowledge whose basis was created by high techindustries (aerospace, electronics and computer)in the decades before. This knowledge, in a senseof a Bavarian “governance spillover”, has beensuccessfully turned into the promotion of abiotechnology pathway, especially into successfulinstitutions assisting the commercializationprocess. Moreover, this knowledge is responsiblefor creating a friendly public “climate” forbiotechnology. The establishment of an innovationand start-up center in Martinsried and of the BioM

AG as effective institutions of biotechnologypromotion are an expression of the Bavarianeconomic and technology policy aimed at makingMunich a leading biotechnology location inEurope. The biotech clusters near San Francisco,Boston and Cambridge serve as models.

In contrast, the biotech firms in Rhineland startfrom the specific circumstances of an old indus-trialized area with an important chemical industry.2

Therefore it is not surprising that the most suc-cessful enterprises in Rhineland focus less on thediscovery process and the development of newpharmaceutical active substances but on thedevelopment of biotechnological devices andinstruments which are broadly applicable inresearch laboratories (e.g. Qiagen, Miltenyi) or inspecific biotechnological production processes(RheinBiotech). The new industry is characterizedby a variety of application sectors and a relativespatial dispersion.

In view of the industrial change and of themassive downsizings in the chemical industrysince the end of the eighties the political actors inRhineland pursue goals in the direction of aregional and employment-oriented policy whereasin Munich priority lies in the development of aresearch-based technology region. The promotionpolicy in Rhineland proceeds from the assumptionthat a broad spectrum of biotechnological activi-ties increases the regional coherence.

Hamburg cannot be considered as a biotech

region. Structural change is much more based onother sectors for example media. Fast growingEvotec BioSystems AG incorporated a consider-able part of the regional potential. Besides somespecific reasons urbanization advantages of a greatmetropolitan area in general favored Evotec’slocation in Hamburg.

4. Spatial structure of input and output 4. relations

Cooperations as a form of input-output-relations

The typology of cooperations leads to a betterunderstanding of the major input-output-relationsin and between companies and institutions. Theycan only be identified on the basis of a detailedknowledge of the firms and intensive interviews.The characterization of cooperations leads to abetter understanding of the externalized input-output relations in the context of a whole innova-tion system. The internalized input-outputrelations remain hidden behind the “closed doors”of the firms. The expansion of the Hamburg-basedEvotec Biosystems AG shows that innovationrelations occur on many different levels. Theregional level is only one of them. Qualified labor,early financing and personal networking amongthe company founders are of great importance(Evotec, 1999, 2000). Despite of their locationwithin a biotech cluster the most advancedcompanies in Munich such as MediGene andMorphoSys developed similar patterns in theirinput-output relations (Oßenbrügge and Zeller,2001).

An innovation-oriented cooperation is usuallyan exchange relationship lasting several months oryears. Cooperation for the common developmentof a technology or a therapeutic active substancerequires a high commitment and confidence in theexchange of information among the partners. Suchagreements frequently consist of very distincttransactions over a longer period of time creatingnew knowledge from which both partners canprofit. At the same time the innovation processinvolves great insecurity. Financial returns fromthe customers range from “milestone payments” toroyalties and to extensive capital investment in thebiotech firm.

Cooperation with producer services in biotech-


nology tends to be short-term although there arealso long-term orders. The customer usually paysfor a clearly defined work of the supplier. Thiskind of input-output-relation bears little insecurity.The agreement has the form of an order or a

purchase. There are normally no significant capitalinterlockings.

Clinical studies are carried out in close coop-eration with hospitals. In the course of the out-sourcing of such studies a market for so-called



Figure 3. Input and output relations of Evotec BioSystems AG, Hamburg.

Contract Research Organizations (CRO) hasevolved. “Late stage” biotech firms (such asMediGene), intending to develop their owntherapeutics, are dependent on a close cooperationwith partners in the field of clinical studies.

At present discovery- and technology-orientedbiotech firms are normally not able to carry outup-scaling processes for the production or even theindustrial manufacturing of active substances. Asa result, a special market developed in this area.Some companies have focused on the biotechno-logical production of therapeutic active sub-stances, for example Rentschler and Thomae(subsidiary of Boehringer Ingelheim). AlsoDüsseldorf-based Rhein Biotech pursues a growthstrategy focused on specialized productionprocesses. It is interesting to see that none of thesefirms is located in the Munich region.

Cooperation with venture capital firms andpatent attorneys can be very decisive in procuringcapital and legal safety especially for those com-panies focused on value intensive and specializedproducts and technologies. These input-outputrelations are important components of the entireinnovation system.

Cooperation with academic research institu-tions is an instrument of knowledge transfer andcommercialization. The cooperation may havevarious forms reaching from licensing and thefinancing of grants for close cooperation partnersin common research projects, depending on theobject and conditions.

Market-oriented agreements can be verydiverse. They can involve a sharing of the marketsand/or a licensing of patent rights or a pharma-ceutical company can acquire control over thedevelopment and marketing rights of a productwhich is based on an active substance discoveredby a biotech firm. In addition we observed thetendency with biotech firms to sell marketingrights to each other in order to neutralize compe-tition. In doing so entry barriers of new marketsare reduced for the partners.

Spatial patterns of input-output relations

What are the spatial patterns of such input-outputrelations? An investigation of important inputs andoutput such as workforces, technology and knowl-edge, capital, devices, intermediate products and

services helps to show the spatiali characterof biotechnology. The following summarizingremarks are based on an investigation of keybiotech firms in Munich, Rhineland and Hamburg.

A highly qualified workforce and the know-howof this workforce are decisive input factors forresearch-oriented firms. There are several factorswhich contributed to a critical mass of researchersin molecular biology and biotechnology especiallyin Munich. In particular the establishment ofresearch institutes such as the Max PlanckInstitute, the gene center as well the longstandingexistence of companies such as BoehringerMannheim contributed to the development of aspecialized workforce. Although highly qualifiedspecialists can be recruited on a European or NorthAtlantic level, the existence of a specialized labormarket is of particular importance to promotebiotech companies. Service-oriented firms aswell are dependant on qualified and specializedpersonnel but not to the same extent as theresearch-oriented firms.

All companies and institutions improve thequalification of their employees. Thus the generalknowledge level is increased and a qualifiedworkforce is created which may serve other firmswhen people change their jobs. Employees, firmsand institutions contribute to the cumulativeregional processes of learning by doing.

Knowledge and technologies are strategicallythe most important inputs for research-basedbiotech firms. Innovative firms obtain technolog-ical knowledge mainly from employees or coop-eration partners. A very important input factor isthe know-how related to the foundation and man-agement of a company. An already existing teamis a prerequisite of a start-up firm. This illustratesthat mutual understanding and trust is a crucialfactor in the early stage of a biotech company.Spatial proximity to the science base and similarcompanies facilitates the start-up process ofbiotech firms remarkably.

On the other hand the acquisition of techno-logical knowledge by in-licensing of patents canhappen almost everywhere. Firms focusing onresearch, technologies or highly specialized pro-duction processes such as Morphosys, MediGene,Genome Pharmaceuticals Corporation andMicromet in Munich, Qiagen, Artemis, RheinBiotech in Rhineland and Evotec in Hamburg


acquired strategic technological inputs fromEurope and North America. Moreover, technolo-gies and substances are developed in the course ofcooperation agreements with large pharmaceuticalcompanies which normally acquire the rights tocommercialize them. These agreements differ ineconomic and legal forms. The various levels ofoutputs and knowledge are often summarized invery complex contracts. The most advancedcompanies are focused on such specialized, highquality and complex technologies that the poten-tially interested partners must be found on a NorthAtlantic or Triad level.

Service-oriented firms such as Toplab orsupplier firms such as Microcoat organize theirinput of technologies by purchasing or leasingthem. The transfer of highly specialized knowl-edge by partners, consultants and patents is lessrelevant than with research-oriented firms.Likewise the production and output of technologyand knowledge is less important.

Most research-oriented firms are based onventure capital. This is especially true of above-mentioned companies involved in a North Atlanticcompetition. From the mid-nineties the financingsituation has improved remarkably and since thattime important venture capital firms have beenestablished in Munich. In addition, companiesbenefited from public grants of the federal statesof Bavaria and North Rhine-Westphalia. Seedcapital came from institutions in the regions, theBioRegio Initiative and the European Union.Companies pursuing an international strategy mustsecure international financing. Highly innovativefirms pursue an international strategy at a veryearly stage. A partnership with well-known inter-nationally active venture capital firms increasesthe confidence in the technologies and the productpipeline of a company, improving the chance tocome to significant cooperation agreements witha pharmaceutical company which will last forseveral years.

Entering into cooperation agreements withpharmaceutical multinationals is a central strategicaim of research-based biotech firms. After the firstperiod of financing based primarily on venturecapital such agreements offer the basis to securethe existence of the company for several years.These companies assume that expansion is only

possible according to the pattern of the U.S. com-panies a few years ago that means pursuingvery aggressive and international financing strate-gies. Private placements and finally the initialpublic offerings on the stock markets are furthercomponents and stages in the financing strategyof a highly specialized research-based biotechcompany.

Less advanced companies and less internation-ally oriented firms in contrast are dependent onregional and national financial sources. The per-sonality of the entrepreneur is extremely signifi-cant. To avoid dependency or guardianship fromventure capitalists a company can deliberately relyon its own capital resources and classical forms ofloan capital. In a similar way service-orientedfirms in the field of laboratory services financethemselves by loans and own capital. Venturecapital is less important because the expectedprofits are much smaller than those of successfulresearch-oriented biotech firms. Finally, it can beconcluded that the availability of seed capital, theexistence of financing institutions and venturecapital companies in the region can mainly be ofgreat importance during the foundation of thecompanies.

Although it could be assumed that research-based companies share certain means of produc-tion with other companies we have found only afew examples of such cooperation in IZB and inthe Max-Planck-Institute. The same is true ofservice-oriented firms and biotech supplier firmsregarding the question of the procurement ofdevices and means of production. Equipment ispurchased or leased. But the enormously highcosts of such equipment such as for proteomicsor mass spectrometrics require a very carefulplanning of the firm’s expansion.

For research-based biotech firms, especiallythose focused on the development of technologiesor bioinformatics, classical physical intermediateproducts are much less important than knowledgeand technologies. The geographical origin is of nosignificance for the procurement of specializedbiochemicals, monoclonal antibodies or otherbiological molecules. Inputs of specialized inter-mediate and auxiliary products have the characterof mass products which can be purchased in manyplaces whereas some intermediate products such


as biochemicals and reagents are important inputsof service firms and biotech suppliers firms. Theseproducts can be important outputs used in researchand development processes in other biotech andpharmaceutical companies. Although we clearlydiscovered important transactions between com-panies in this field, a specific spatial context ofthese transactions cannot be identified.

Technology and discovery-oriented biotechfirms normally procure analytical services, DNA-sequencing and other laboratory services frombiotech and other companies specialized in theseactivities. Our research gives evidence for theassumption that spatial proximity to the customerscan be very useful for service-oriented biotechfirms. This allows a fast and exact handling of thespecialized orders. Spatial proximity allows theintensification of the division of labor betweenclients and service firms though it is difficult toestimate its exact significance.

The exchange of input and outputs can takevery different forms and shapes depending onconditions, business sectors and market structure.While input-output-systems of supporting firmslike service and supplier firms are characterizedby market exchange, relations between research-oriented biotech companies and pharmaceuticalmultinationals represent a great difference betweenhierarchies and markets. Depending on the com-plexity of the common project the cooperationagreements can combine almost all transactionforms such as licensing, purchase, capital invest-ment, milestone payment, royalty and leasing. Itis decisive that the cooperation agreementsrepresent exchange relations which will last forseveral years. Already the enormous transactionexpenditures to arrange such longstanding andcomplex contracts are signs for the importance ofuntraded relations of all the actors involved.

An analysis of input-output relations of biotechfirms shows that with respect to “hard” and tradedinterdependencies spatial proximity is not adecisive factor. But spatial proximity facilitates“soft” untraded interdependencies and tacit knowl-edge. The relevance of these factors depends onthe business focus, growth strategy, market con-ditions and maturity of the firms.

5. Conclusion: Scales of innovation systems 5. and untraded interdependencies

Spatial concentration and relational assets

Our research confirms the great importance ofpublic research institutions. A science base strongin quality and quantity is a prerequisite for thespatial concentration of biotech firms. Moreover,adequate conditions are important for the transferof knowledge into applicable and commercialknow-how.

Interactive innovation relations exist on verydifferent scales. Highly innovative and specializedbiotech firms active in the discovery of pharma-ceutical active substances and the development ofnew technologies usually enter into cooperationwith big pharmaceutical corporations. Suchinnovation relations are mostly international ortransatlantic. Biotech firms offering specialservices or biotech suppliers are more likely to beintegrated in regional innovation relations.

The problems related to the transfer of knowl-edge as well as the accumulation and transmissionof tacit knowledge are decisive factors favoring aspatial integration and specialization of biotechfirms and institutions. This spatial integration cantake various forms. The emergence of agglomer-ations of biotech firms as well as the creation oflarge “centers of excellence” by pharmaceuticalcompanies are possibilities to take into accountthe importance of tacit knowledge. This doesnot exclude that common projects and a denseexchange of information and knowledge can beorganized over long distances. This is mostobvious in the numerous cooperation agreementsbetween biotech firms and pharmaceutical multi-nationals. However, spatial concentration andaccumulation favor “untraded interdependencies”and therefore reinforce regional innovationsystems.

Spatial proximity facilitates the integration ofspecialized suppliers and service firms into theentire innovation system going along with thecomplexity of innovation processes. For a suc-cessful interaction among biotech firms, forservice firms and commercialization actors suchas technology transfer institutions, patent attor-neys, venture capital firms and finance and con-sulting firms spatial proximity is often more


relevant than for input-output relations amongbiotech firms.

Significance of untraded dependencies and thesignificance of regional governance

An agglomeration of firms does not in any wayconform with dense intra-regional exchange andinterweaving relations. In addition to spatialagglomeration the “systemic” relationships areimportant to understand innovation systems(Cooke, 1998, p. 10f). To exchange “tacit knowl-edge” and “untraded interdependencies” spatialproximity is necessary, at least temporally. Thesignificance of untraded relations may be illus-trated by the following two examples:

Especially in the early stages of foundation ofa company untraded and tacit knowledge canbe of great importance. Entrepreneurs musthave some knowledge about scientific, market,financing and management issues related togrowth perspectives of their firms. A remarkableamount of this knowledge cannot be purchased.It has to be created within specific social contextsof the research community itself. This means thatproximity and clustering favors the creation ofsuch untraded dependencies which finally lead torelational assets in a specific region.

The second example emphasizes the coopera-tion between biotech firms and big pharmaceuti-cals. In this case, untradable relations are acondition to conclude a complex cooperationagreement. Both partners share the perception ofthe business perspectives, of the goals and themajor milestones of a common project, they haveto trust each other. Mutual understanding isnecessary to achieve common goals in businessactivities. But this argument suggests that regionalcoexistence does not play a crucial role becausemost cooperations among biotech and pharma-ceutical companies are on a North Atlanticscale.

Both examples illustrate different spaceconcepts of firms. While for small and less spe-cialized biotech companies proximity is relativelyimportant to organize their crucial input and outputrelations, bigger, advanced and highly specializedcompanies which are focused on high value addedtechnologies and products organize a “time-space-compression”. For the latter group it is even

necessary to manage operations beyond theregional and national scale.

The different developments in Munich,Rhineland and Hamburg can be interpreted as anexpression of specific industrial and technologicalpaths (Zeller, 2000b). The emergence of veryspecific biotech agglomerations in the regions ofMunich and Rhineland as well as the strongpolitical and institutional support of the “businesscommunities” (Cooke, 1998) contributing to thereduction of entrance barriers and a risky com-mercialization process confirms only partially theexistence of “regional worlds of innovation”(Storper, 1997). The regional processes are over-lapped by powerful triadic or highly selectiveglobal processes. Yet the success of the Hamburg-based Evotec emphasizes that agglomeration orclustering are not a condition for a very dynamicgrowth of an individual corporation.

Regional specialization as a source of extra-profit for multinationals

Successful biotech firms, especially technology-and discovery-oriented firms, normally enter intocooperation with big pharmaceutical companies.This means that globally active companies basedoutside the regional structure give importantincentives for the development of new productsand technologies. In the fields of the discovery anddevelopment of new pharmaceutical substancesregional actors are integrated in global networkswhich are shaped by powerful oligopolies.Therefore multinationals use the local competencewithout being forced to contribute to the devel-opment of regional assets to the same degree. Thusregional relational assets are an important factorfor the re-organization of multinational companiesbecause they allow the internalization of resultsfrom research and development activities con-ducted by external partners as oligopolistic rivalscombine regional innovation systems (Zeller,2001a) by a selective globalization of the use andproduction of technology.

Fuzzy scales of innovation systems

The results show that the spatial organization ofinnovation systems in biotechnology must beunderstood by a differentiated understanding of


the scales of input-output relations which gobeyond the rhetoric of globalization and region-alization. Companies organize their input-outputrelations on very different scales. The tendenciesand advantages of regional agglomeration are notequally relevant for all companies, functions andactivities. The spatial organization of innovationsystems can be shown only by a dynamic inter-pretation of scales.

• Classical agglomeration advantages exist due tothe spatial concentration but they do not revealthe real interweaving in the industry. Incontrast, untraded interdependencies and tacitknowledge are factors requiring, at leasttemporally, a spatial proximity. Innovationprocesses of highly specialized and advancedtechnologies normally happen on a NorthAtlantic as well as on smaller scales. For tech-nologically advanced companies and thosecompeting on a global scale regional andnational contexts play a minor role. The scaleof innovative activities depends on many dif-ferent factors such as technological competi-tion, market structure, opportunities forcooperation and capabilities of transferring tacitknowledge.

• The industrial capitals, many regulatory condi-tions, and political power relations continue tobe constituted on a national level. In the contextof a global competition national states imple-ment national innovation policies in order tobuild and attract high value-added sectors intheir sphere of influence. The BioRegio andBioProfile Competitions are an expression ofthese efforts of German technology policy.Organizing an institutionalized competition ofthe regions represents the specific Germanvariety of a national biotechnology policytaking up deliberately the federalist context ofGermany.

• Innovative biotech clusters are a result of anappropriate perception of regional actors withregard to the relations between global scientificand economic conditions and the potentials ofa region. At the same time the understanding ofthe economic and social path dependencyallows to identify better options for a futuredevelopment. Therefore, the local social andcultural context permitting such perception is

the sphere where untraded relations and tacitknowledge evolve and where we can identifyevidence of a regional innovation system. Butthe regional scale in itself does not explain thedynamic within certain regions or within thebiotechnological sector. Proximity is just oneaspect of different and interacting scales ofinnovation.

Notes

1 This article is an outcome of the research project Spatialorganization of innovation systems in the field of biotech-nology supported by the German Science Foundation (DFG).2 The importance of the chemical and pharmaceuticalindustry for the emergence of spatial biotech concentrationsis controversial (Willoughby and Blakely, 1990; Willoughby,1993; Gray and Parker, 1998). While the chemical industryin Rhineland plays a very important role and in Munich asubordinate one, the pharmaceutical industry is present in bothregions but without being a dominant sector. In the Hamburgregion there are only a few pharmaceutical companies andthe chemical industry focuses on basic chemicals.

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