by Professor Vincent Mangematin
Nanotechnologies are seen as having the potential to revolutionize many scientific fields and many industries, in particular by fostering convergence between previously distinct technology-driven sectors1. These expectations are not solely about the creation of scientific fields, but also concern the emergence of new markets and the involvement of firms in developing nanotechnology-based products and processes for such markets. In contrast to biotechnologies, which are organized around drug development processes, the changes associated with nanotechnologies mainly concern their introduction into existing products or processes2,3. Large firms which already have products in the markets may have a competitive advantage in engaging in nanotechnologies: this paper analyses what strategies such large firms adopt to invest in nanotechnologies.
Nanotechnologies redefine existing industries, and array them in new combinations: changes already underway include the merging of microelectronics and biotechnology, and of nanoelectronics and chemistry. This redefinition can combine two aspects of innovation - enhancing competences based on building knowledge and experience, as well as destroying competences by forcing the renewal of the firm's knowledge base4. In such a context5 - where technologies are emerging, markets are nascent and uncertainty high - what determines large firms to invest in nanotechnologies? How intense will their involvement be? How will their knowledge bases evolve in the process?
In this article, we address these questions by exploring the ways of large R&D performers to invest in converging technologies, and specifically the patterns of firm involvement in nanotechnologies. To do so, we built a database of firms involved in nanotechnologies. We use a validated search strategy based on keywords6 to extract information about nanotechnology publications and patents - from ISI/web of Science and PatStat respectively - so as to identify firms which have published and/or patented in nanotechnologies, which involves about 15,000 firms between 1996 and 2008. Nanotechnology is defined as the ability to manipulate elements at the nanoscale.
To identify large established firms, we focus on groups which belong to the list of the 1,400 largest R&D performers worldwide in 2008 (source: DTI, UK). Among the 1,400 groups, 768 have published or patented in nanotechnology between 1998 and 2006. These 768 top performing groups contain 2,980 subsidiaries which are active in nanotechnologies. We downloaded and analyzed all their patents so as to characterize their knowledge base, and established diversity variables to measure the breadth of these firms' R&D activities based on the US Patent Office Classification. R&D activities specialized in nanotechnologies were thus identified, and the proportion of Nano R&D activities amongst all R&D activities analyzed other time.
Across the whole period, nanotechnologies remained marginal in the patent portfolios of large firms. This is due to the resilience of their established technological trajectories (as revealed by their patent portfolios) as well as their basic strategies of concentrating on their core businesses and extracting economic value from their existing knowledge base. Large R&D performers tend to invest in a small number of subsidiary companies to prepare for their evolution towards nanotechnologies. These subsidiaries are not dedicated to nanotechnologies. They generally hybridize nanotechnologies with their existing knowledge base, addressing existing markets. Two different patterns can be recognized: in some companies (mainly those in high tech industries - ICT, biotech, etc.), nanotechnologies are developed to build a competence in nanotechnology and to design, produce or sell nanotech products. In others (normally in more traditional industries) nanotechnologies are hybridized with other technologies such as agro food, chemistry or textiles. Nanotechnologies appear to be a general purpose technology that can be hybridized with other technological fields to address existing markets through disruptive innovations. Nanotechnology innovations have been included in existing products or processes, within existing business models, but also - as in the cases of ICT and (to a lesser extent) biotech - new business models may emerge, based on applications that include nanotechnologies.
Firm Imvolvement in Nanotechnologies
Innovation management scholars generally describe the pattern of alternating incremental and radical innovations that spur the emergence of new technologies7-9. During rapid phases of change, new entrants outperform incumbents who, according to Henderson10, tend to under-invest in radical innovation as they fall into competency traps and face core rigidities. However, large incumbents firms are often responsible for considerable numbers of innovations, and Rosembloom11 and Cattani12 have explored ways in which they initiate radical innovations, and shown how they can adapt and survive, and even regain high market performance levels. Which are the situations in which incumbents outperform start-ups in introducing radial innovations?
When nascent technologies emerge to challenge existing ones, uncertainty increases and the possibilities of foresight are reduced. In the highly turbulent markets that ensue, incumbents may produce radical innovation through pre-adaptation. Diversifying their knowledge base, they can create seeds of absorptive capacity in different fields, enhancing their pre-adaptation capabilities, reinforcing their ability to identify promising scientific and technological fields and finally hybridizing their knowledge base with new knowledge streams.
As a converging technology, nanotechnology presents interesting characteristics: it is a radical innovation (which is thus partially competence destroying) but at the same time, it inherits from its parent technologies and mostly leads to process innovations. Nanotechnology is the newly hyped technology, and public authorities are investing in nanotechnologies, stimulating the formation of clusters, subsidizing researches and encouraging firms which invest in nanotechnologies. Firms are coming from different industries are turning microelectronics into nanoelectronics, biotechnology into nanobiotechnology etc., generating high uncertainty and turbulence. Focusing on this emerging potential for radical innovations based on converging technologies, this paper analyses how large firms invest in nanotechnologies. Which are the modalities and how do pre-adaptation capabilities develop?
Given that nanotechnologies have emerged only very recently, it is difficult to assess the performance of firms involved as Nesta13 did for the world's largest manufacturing corporations. We therefore focus on the modalities required to be involved in nanotechnologies. We operationalize the notion of pre-adaptation as the degree of nanotechnology patent within the firm knowledge base. We define Intensity in nanotechnology as the proportion of nanotechnology patent within firm's knowledge base, which we label Intensity in nanotechnology This variable measures the extent to which nanotechnologies are ‘entering' the firm knowledge base and the degree to which they affect its patent portfolio structure. Low nanointensity means nanotechnology remains marginal to a firm's knowledge base, while high nanointensity describes firms which are more ‘nanodedicated'.
Following the Corning case study proposed by Cattani12, we can identify different variables which influence firms' degree of involvement in nanotechnology. Based on existing research in biotechnology (Nesta, 2008), we first consider the diversity of the knowledge as a key variable. When diversity is large enough, the breadth of the firm's knowledge base is extended, increasing its chances of taking nanotechnologies on board in the next future. However, the proportion of nanotechnology will still be low, given as the greater breadth of the knowledge base, so diversity needs to be moderated by the size of the knowledge base.
Proposition 1: The larger the Knowledge Base of the Firm, the Higher the Nanointensity, Moderated by the Size of the Firm
Incumbents pre-adapt nanotechnologies, and have already developed their knowledge base and technological competencies. Firms which hybridize nanotechnologies with their existing knowledge base are not dedicated to nanotechnologies: they will already have a track record of research their patent portfolio had structured the firm pre-adaptation. When the breadth of the knowledge base is analyzed at the firm level, it is based on the size and the diversity of the knowledge base. However, internal diversity is not the only way to increase a firm's capacity to absorb knowledge. The firms under review all belong to groups, and, based on the ways knowledge circulation is organized within the group14, the breadth of the knowledge base may be considered not only at the level but instead at the group level. We can assume that the larger the group, the higher the diversity and the more likely subsidiaries will be specialized. Thus, proposition 2 suggests that the size of the group will positively influence the level of nanointensity at the subsidiary engaged in nanotechnology research.
Proposition 2: The Larger the Size of the Group, the Greater the Nanointensity
When the subsidiary company is within a cluster specialized in nanotechnology15,16, geographic proximity with other actors involved in nanotechnology may increase the involvement of firms in nanoresearch. We can thus also propose that:Proposition 3: Firms Situated Within Nanoclusters have Greater Nanointensity than those Outside Nanoclusters
Following both Cohen and Levinthal17 and Cattani12, we can assume that pre-adaptation and absorption capacity are closely linked. To increase the absorptive capacity and pre-adaptation, firms invest in and are active in basic science research.
Proposition 4: Firms which Perform Basic Research have Greater Nanointensity
Finally, as Cattani12, firms may adapt their strategy. As their context changes, the interest in towards nanotechnologies may be more visible in the recent period. As nanotechnology becomes more fashionable, changing firm strategies may transform their research trajectories. Are the determinants of nanointensity during the pre-adaptation period similar to those of the most recent period? How does the firm knowledge base transform as nanotechnology matures?
Proposition 5: The determinants of nanointensity in the recent period are different from the determinants for the whole period
Nanotechnology presents specific patterns of development, being mostly a business of large firms. Investment is mostly made by large groups, but investments by the largest worldwide R&D spenders remain marginal, and are mostly channeled firms via a few of their medium-sized subsidiaries.
Specificities of Nanotechnologies
Nanotechnologies are the newly hyped technologies, attracting both public and private investment in R&D. Actors - be they firms, universities, research labs or public authorities - are forming expectations about their ability to create not just new scientific fields but also new markets, expecting that profits will be generated for firms which produce and market products and processes based on nanotechnologies. Such promise is based on nanotechnologies ability to redefine existing industries, through new combinations, merging microelectronics and biotechnology, nanoelectronics and chemistry, etc.
The number of nanotechnology patent applications has been booming worldwide, with about 200,000 patent applications (extended family level) . But the number of firms involved in nanotechnologies and filling patents remains low, at only about 10,000. One third (2,986) of those are subsidiary companies of the 1,400 largest R&D spenders, illustrating the key role of large R&D performers in the new technology. However, they still only represent a marginal proportion (4%) of these groups' subsidiaries and nanotechnology still represents only a limited element in their knowledge bases - and yet between them, they have filed one third of the total patents applications in nanotechnologies. So we can say that nanotechnology is developing within large firms, and even if it remains marginal in the global knowledge base, there are highly concentrated developments within a small number of companies.
Nanotechnologies appear as a new way to disseminate and create value from new technologies, Compare to biotechnologies - which have been developed by small firms and marketed through alliances between start-ups and large firms close to the market - nanotechnologies are developed and marketed by the same firms which then embed them into existing products and devices.. While pre-adaptation has seemed marginal in biotechnologies (as exploration has been performed) by small firms, it becomes central when new technologies have to be hybridized within existing knowledge.
In nanotechnologies, large firms are investing in pre-adaptation in order to speed up the development of new technologies when markets emerge. Technology transfer is no longer a central issue, as cooperation between large firms and R&D producers (whether private or public research organizations) has usually been routine for a long time. Pre-adaptation and enhancing the scope of the knowledge are becoming critical factors for nurturing innovation based on hybridization between the existing knowledge base and new technologies. Surprisingly, it seems that hybridization is mainly based on the mobilization of internal knowledge - neither geographic proximity nor group size play significant roles in increasing nanointensity.
In such a situation, where pre-adaptation is critical, public policies should aim to stimulate research around nanotechnologies, but avoid over focusing on them specifically: as general purpose technologies, nanotechnologies need to be merged with existing knowledge. Basic research capacity and experience remain key, to increase absorptive capacity. Thus, public policies need to parallel firms in their general purpose technology investment, by supporting basic research and collaboration with universities and research organizations.
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