Biotechnology & Competitiveness

Biotechnology is a new set of techniques that can be used in basic research, product development, and manufacturing in several different industries. Although it was primarily developed in the United States, funded mainly through government support for basic biomedical research, there are growing concerns that, like some other native technologies, biotechnology will be rapidly adopted and commercially applied elsewhere, leading to a loss of U.S. preeminence in this area.

Biotechnology was first applied commercially in producing diagnostics and therapeutics. These applications were the most obvious because most of the developers of the new techniques were conducting basic biomedical research. Most recently, genetically engineered biopesticides have won regulatory approval in the United States. Further agricultural applications are expected within the next 10 years.

In the United States, the earliest firms to exploit these new techniques were the dedicated biotechnology companies (DBCs). Financed with venture capital, they were founded in the late 1970s and early 1980s to apply the new techniques to the development of diagnostics, pharmaceuticals, pesticides, plants, and other products. Although these firms are often referred to collectively as the “biotech industry,” the dedicated biotechnology firms are, in fact, developing products and competing with firms in existing industries. DBCs, regardless of the products they make, share some characteristics and certainly compete with each other for capital. But industries are defined primarily by the products they produce and the markets in which they compete. As DBCs develop and become engaged in commercializing products, the problems they face are characteristic of the existing industries to which they belong. Thus, their problems become more understandable if DBCs are regarded not as “biotech companies’ but as young firms in, for example, the pharmaceutical, agricultural, or waste treatment industries.