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Georgia’s Approach to Biotechnology

Why Biotechnology? Why now?

      The biotechnology sector is considered the “lates...
evaluating Georgia’s current direction. Given the tremendous investments being made
in this initiative, this analysis will...
North Carolina                    86,384                   7,428,672              1:86
        Annually, Georgia’s system ...
expenditures, Georgia’s universities spent about $400 million in R&D on biotech related
sciences (Leigh).

       Georgia ...
University of Georgia now has a $28 million Center for Applied Genetic Technologies—
for animal and plan science researche...
•   Institute for Bioengineering and Bioscience at the Georgia Institute of
   •   Viral Immunology Cent...
Other centers of innovation in the biotechnology sector include California,
Massachusetts, and North Carolina. These three...
funds are largely privately funded in Massachusetts. Bioventure Investors, LLC is one of
five large, privately operated co...
Venture Capital & Tax Incentives

        Despite the fact that Georgia’s focused approach may minimize the need for
start-up assistance programs are intended, in general, for any potential product in the
field science and technology. Its ...
While it is easy to speculate, without having completed such a macro-level study
or the accompanying input-output analysis...
—for Darby & Zucker affirm that in order to attract venture capital an economy must
have a cluster of already existent act...

       Georgia’s approach to biotechnology development focuses, almost exclusively, on
start-up activity. Geor...

Bergman, Edward and Edward Feser. Industrial and Regional Clusters: Concepts and
Comparative Applications. (ww...
Musero, Frank. “Biotech Filings Reveal Lack of VC Funding.” The IPO Reporter. New
York. November 12, 2001.

National Human...
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Why Biotechnology? Why now?


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Why Biotechnology? Why now?

  1. 1. Georgia’s Approach to Biotechnology Why Biotechnology? Why now? The biotechnology sector is considered the “latest and greatest” in business development trends—it is “in vogue” just as information technology business growth was during the 1990s (Vollmer). Most states across the country are making efforts to develop themselves as players in this emerging sector. Just as information technology ventures experienced overwhelming successes over the past decade, many now have high hopes for the future of the biotechnology sector. Biotechnology refers to “a set of techniques such as genetic engineering, cell and tissue cultures, protein synthesis and enzymology that involve manipulation or change of the genetic patrimony of living organisms” (Estades & Ramani). Biotechnology has been around for at least 30 years—yet it is now considered an area of great opportunity because of recent developments in the field (Dibner). The Human Genome Project opened many doors for development in the field of biotechnology. While only 10%-20% of the genes are defined by function at this time, advances in information technology have allowed researchers to process and “decode” the genome faster than ever (NHGRI). With greater understanding of the genome (and more discovered everyday), opportunities for biotechnology development should continue well into the future—with “no end in sight” (Dibner). Biotechnology, as an emerging “sector,” can now be categorized into distinctive paths of development: biomedical, ag-biotechnology, personalized medicine, gene therapy, and platform technologies and diagnostics (Dibner). While the topologies of the industry vary by source, it is clear that the industry is growing to accommodate contributions from a diverse set of disciplines. The pharmaceuticals industry is expected to grow from $300 billion a year to $3 trillion over the next 20 years. Drug discovery “targets” are expected to grow from the current 400 discovery targets to about 4,000 over the next 20 years (GRA). Georgia’s standing in this biotech race and its direction should be couched in realistic terms. Georgia’s efforts are ambitious—seeking to overcome a tremendous obstacle, an effort in which others states with similar initiatives find themselves lacking. This paper will begin by reviewing Georgia’s standing in the biotech industry in relation to its competitors—in addition to reviewing its efforts to close this gap. This review will provide a framework in which to compare and assess the reality of Georgia’s situation. Following the analysis of Georgia’s efforts toward creating a competitive biotech industry, the methods and decision-making process by which the biotech initiative has progressed is discussed in terms of its potential opportunity costs. Finally, economic development literature now provides interesting insights into critical success factors for biotechnology development initiatives—this discussion of will provide some basis for
  2. 2. evaluating Georgia’s current direction. Given the tremendous investments being made in this initiative, this analysis will conclude that further investments should only be made contingent upon more thorough and grounded evaluations of Georgia’s prospects as an effective competitor in the biotechnology industry. Where Does Georgia Stand? While numerous factors are necessary for the development of Georgia’s biotech sector, the following section will provide a review of its assets in relation to competitors in biotechnology. The focus of this review is to provide a snapshot of the current state of Georgia’s education and workforce, the state biotech industry, research and development activities, and venture capital opportunities. Education and Workforce in Georgia An obvious need for biotechnology development, a high-tech field, is a high quality educational system and a highly skilled workforce. The development of a skilled workforce, in particular, is essential to attract and retain high-tech businesses. Specifically, any state seeking to recruit, develop, or maintain biotechnology businesses must have a skilled workforce in the area of medical, biological, engineering, and other related biotechnology-related disciplines. A survey of Georgia’s larger research universities reveal a number of biotechnology related programs, including: • University of Georgia: Department of Biological and Agricultural Engineering; and the College of Veterinary Medicine. • Emory University: Programs in biochemistry, biomedical engineering, biostatistics, molecular pathogenesis, molecular genetics, and neuroscience. • Georgia Tech: Programs in bioinformatics, bioengineering, genetics, environmental biology, microbial biology, and biochemistry. • Medical College of Georgia: Programs in biochemistry, anatomy, pharmacology, physiology and endocrinology, oral biology, and vascular biology. Table 1: Comparison of Graduates in Science and Engineering (1993-1997) State Graduates in Science & State Population Ratio Engineering Graduate : (Bachelors, Master, PhD) Population California 330,837 32,217,708 1:97 Georgia 66,473 7,486,094 1:112 Massachusett 135,905 6,115,476 1:45 s
  3. 3. North Carolina 86,384 7,428,672 1:86 Annually, Georgia’s system of higher education produces about 12,000 graduates in fields of science and engineering (Leigh). A look at other states (such as North Carolina, California, and Massachusetts) demonstrates that while the system has its strengths in quality and depth of disciplinary coverage, Georgia’s system of higher education may be lacking in the quantity of graduates produced juxtaposed to other states that are well positioned in biotechnology. (A normalized statistic, with respected to population, is more appropriate when comparing states of different sizes—seen in Table 1.) Georgia is last (among the states listed above) with respect to graduates in science and engineering (normalized by population). Biotech Firms in Georgia The “biotech industry” is really a combination of companies that have some biotech-related activity and of companies that are dedicated to exclusive biotech activity. In order to get a realistic appraisal of the effort required to make Georgia a competitor in the biotech market, one must assess where Georgia ranks currently. Such an assessment will provide an overall picture of how Georgia is perceived as a competitor in the biotech field. Georgia ranks 25th among all states in the concentration of local biotech firms. Accordingly, Georgia is home to 1% of all biotech firms in the country. Most biotech firms are concentrated on the west coast and in the New England area; the top five states include California (23% of all firms), Massachusetts (11% of all firms), Maryland (8% of all firms), New Jersey (6% of all firms), and Pennsylvania (6% of all firms) (Leigh). Georgia’s 19 biotech companies are concentrated in the Atlanta area—although they are miles apart and not well connected. A recent survey indicates that in the year 2000, Georgia’s biotech firms provided 1,900 jobs and generated about $270 million in sales (Leigh). Based on even a cursory glance at Georgia’s current biotech industry, it is clear that Georgia’s industry is rather small (compared to other states)—it has not yet acquired the “critical mass” necessary for fast growth (Bryant). Research & Development Research and Development is critical for growth of biotech industry. Like other science-based and technology-based industries, the biotech industry depends upon basic research. R&D expenditures and the ability to attract R&D funds will be a necessary foundation for those seeking to compete in the upper echelons of competition in the biotech industry (Dibner). According to a recent survey of R&D
  4. 4. expenditures, Georgia’s universities spent about $400 million in R&D on biotech related sciences (Leigh). Georgia is home to dozens of academic research centers related to biotech— these research institutions are concentrated in Atlanta and Athens, including centers at UGA, Georgia Tech, Emory (all that house federal research programs by the USDA, NIH, and FDA), and the Centers for Disease Control headquartered in Atlanta. Georgia is ranked 4th among all states in annual R&D funds per capita. In terms of federal R&D funds, Georgia ranks high as well. Annual per capita federal R&D funds exceed those found in states like California, Massachusetts, and North Carolina (Leigh). Surprisingly, states with fewer R&D resources have more well-developed biotechnology industries. Venture Capital The biotech industry is a burgeoning industry, in light of recent discoveries with the human genome. Despite its potential, the industry has its own set of challenges. Most biotech firms produce drugs, chemicals, or other products that require the approval of the Food & Drug Administration. The approval process is a long and arduous process—taking at least 10 years and millions of dollars to conduct clinical trials. With at least a decade’s lag-time before products are brought to market, any efforts to develop start-up firms that create federally regulated products will yield little growth for the short-term (Dibner). For start-ups the tremendous capital required at the onset of starting business is a tremendous obstacle; estimated costs for a startup include about $10 million in the beginning. For start-ups that are developing a new drug (or other products regulated by the FDA), bringing a new product to market can cost up to $400 million—including the clinical trials process (Dibner). Access to large quantities of capital is, therefore, critical for the success of biotech firms. Georgia ranks low in the number and amount of venture capital deals in the area of biotechnology. Investments in Georgia biotechnology totaled $85 million in 1999—ranking 5th for the year 1999. However, over a longer period of time (1980-1990), Georgia falls out of the top 5 recipients of venture capital investments (Leigh). Georgia’s Direction Georgia, like many other states, has identified the biotechnology sector as a part of its vision for economic development. Georgia has developed a strategy to attract “just the right mix of venture capital firms and cutting-edge research” to make its mark in the biotechnology community. This strategy is touted by some as the “same strategy used to create the-now-legendary Silicon Valley” (Bryant). Recently, Georgia opened doors for more research by building new facilities for biotechnology research. The
  5. 5. University of Georgia now has a $28 million Center for Applied Genetic Technologies— for animal and plan science researchers. This facility also houses a center for biotech start-ups, the Georgia BioBusiness Center (Bryant). Georgia Tech now has a $30 million facility that will house an Institute for Bioengineering and Biosciences, Engineering Research Center for the Engineering of Living Tissues, and a joint effort with Emory University Department of Biomedical Engineering (Bowie). The Georgia Research Alliance funnels state money into research programs across the state—dedicating the largest portion of its contributions to biotechnology research, totaling $300 million since 1992 (BIO). The Atlanta Metro Chamber Commerce has also joined the effort by developing a biotech task force to “partner the business community with the academic community” (Bryant). These efforts are the most recent developments as Georgia joins the countrywide trend toward biotechnology development. Georgia is beginning its efforts to develop biotechnology while many other states are making similar efforts to do the same. In the past 4 years, as many as 10 states reported the development of biotechnology strategies. Georgia’s joins 40 other states that are “competing” to gain ground in the biotechnology sector. Georgia already offers tax incentives for research expenditures. This includes a 10% tax credit for research expenditures—any unused credit can be carried forward for 10 years. The credit taken in any one year cannot exceed 50% of the net income tax liability (BIO). In addition to tax incentives, Georgia is developing a number of other initiatives to augment its efforts. Georgia is in the process of building numerous research facilities to accommodate biotechnology research. In addition to the facilities mentioned previously, Georgia (including investments from the Georgia Research Alliance) has built or will build the following facilities in its effort to boost its bid in the biotechnology market: • Institute for Molecular Medicine and Genetics at the Medical College of Georgia • Center for Applied Genetics Technology at the University of Georgia (focused on plant and animal genomics) • Emory Vaccine Research Center that houses a federally-funded Center for AIDS Research • Animal Health Research Center at the University of Georgia • Center for Behavioral Neuroscience at Emory University (an NSF-designated Science & Technology Center) • Combinatorial Chemistry Center at Georgia State University • Georgia Tech / Emory University Center for the Engineering of Living Tissues (an NSF-designated Science & Technology Center) • Georgia Tech / Emory University Department of Biomedical Engineering
  6. 6. • Institute for Bioengineering and Bioscience at the Georgia Institute of Technology • Viral Immunology Center at Georgia State University • NIH Pilot Research Center in Structure Genomics at the University of Georgia Additional Technology Development Centers are being considered for several other sites. The Technology Development Centers are intended to provide laboratory and office space for private research being conducted in conjunction with publicly funded activities. The Advanced Technology Development Center (ATDC) is currently located at the Georgia Center for Advanced Telecommunications Technology. This model of “co-location” has become a model for future facilities (BIO). While Georgia now has three biotech incubators, it is among 12 other states that have staff dedicated to working with and assisting the biotechnology industry (Bryant). In addition to the facilities for public research and the development of private research and firms, Georgia offers services to biotechnology firms: • For research with market potential (being conducted at one of the university research centers), the Georgia Research Alliance’s Technology Partnership Program provides matching funds. • The Faculty Research Commercialization Program assists researchers with delivering their technologies to the market place by assisting applicants with business planning and market analysis needed for a successful business. • Georgia’s Intellectual Capital Partnership Program provides accelerated education for highly skilled workers to meet specific needs where significant demands exist. • Georgia is now developing a “Bioscience Strategic Framework” that will guide future state investments for use as venture capital in biotechnology firms—this is a cooperative decision-making process including the Board of Regents, Governor’s Office, Georgia Research Alliance, and the Department of Industry, Trade, and Tourism. Because Georgia has little presence in traditional biomedical and pharmaceutical industries, it is choosing to focus on biotechnologies that build on strengths already existent in the state’s research institutions. Specifically, Georgia is focusing efforts in a few areas—bioinformatics and agri-biotechnologies. Bioinformatics is the “inter- disciplinary science that combines mathematical, statistical and computer science methods to interpret biological data and answer biological questions” (GRA). This focus, in particular, is augmented GRA’s hopes of recruiting several scholars in bioinformatics over the next few years, as a part of the GRA Eminent Scholars Program. Other States’ Initiatives
  7. 7. Other centers of innovation in the biotechnology sector include California, Massachusetts, and North Carolina. These three states are chosen to provide insight into the nature of other state’s initiatives and a means of comparison. All three states have long records of strength in the research and development communities. Their university systems are strong, producing great numbers of graduates in science and engineering to join the workforce. And within all three states, the pharmaceutical and medical communities have a strong presence (although less so in the case of North Carolina). In addition to their existing strengths, these communities have decided to make efforts to encourage greater growth in biotech innovation and start-ups (BIO). North Carolina is an often-cited example of success in developing a biotech center. The Research Triangle Park in North Carolina, a recognized “biotech hub,” found its origins in North Carolina’s initial efforts over 35 years ago to create a science and technology center. According to a recent report, “Georgia is where North Carolina was eight to 10 years ago” (Bryant). North Carolina now employs over 40 full-time professionals to serve the biotech industry, provides financial assistance to biotech companies and universities, provides training for biotech employees, provides tax incentives and exemptions for certain equipment purchases, and supports a number of consortia that allow for education and networking among those within the industry. Of particular interest and in contrast to Georgia, North Carolina offers many options for seed and venture financing focused specifically on biotechnology development. The North Carolina Biosciences Investment Fund provides seed capital to biotechnology firms. The North Carolina Biotechnology Center provides loans for early stage research and development. In addition to these opportunities, North Carolina’s Innovation Research Fund offers financing to new technology-oriented businesses (BIO). California has increased efforts to mitigate the risk of start-ups in biotechnology. A net operating loss credit of 100 percent to new business (for those under $1 million and for eight years), exemption to state sales taxes, and an investment tax credit on equipment purchases relieve some strain on new businesses as they bring new products to market. In addition to these tax incentives, monies from California’s state investment accounts can be used to invest in biotech companies. California’s Public Employees’ Retirement System (along with additional monies) provide up to $500 million to invest in biotechnology firms located in California. To date, $285 million has been allocated for five investments. California also employs a “biotech ombudsman” to advise new firms as they begin their business within the state (BIO). Massachusetts also offers an array of financial incentives, including a net operating loss credit, a tax credit on research, an investment tax credit, and property tax exemptions for facility expansions. Massachusetts also uses its state investment funds to pool money for investments. The Emerging Technology Fund supports new ventures with real estate and facility construction. The Small Business Capital Access Fund helps small firms gain access to loans. Massachusetts also employs a dedicated specialist to serve as a liaison for the biotechnology industry (BIO). Seed and venture
  8. 8. funds are largely privately funded in Massachusetts. Bioventure Investors, LLC is one of five large, privately operated companies that provide seed and venture capital to biotechnology firms in Massachusetts. While Massachusetts does have a state-operated fund, the Massachusetts Technology Development Corporation (MTDC), the fund does not generally provide the seed and venture capital for biotechnology companies. MTDC’s resources cannot accommodate the demand for capital needed in biotechnology companies (BIO). Discussion In general, states across the country have recognized the needs of biotechnology firms and the biotechnology industry—these include (1) quality education and research in biosciences, (2) access to seed and venture capital, (3) transfer of public-funded research to the market (4) specialized biosciences facilities, and (5) a skilled workforce. Georgia has an approach that is similar in many ways to many other states. The most common approaches include development of education and research, new facilities, enhancing seed and venture capital access, tax incentives, and assistance in the commercialization of research and development. Georgia has identified a few problem areas, specific to its situation. Georgia lacks adequate access to venture capital—the majority of funding in Georgia is public. Georgia has strong research and development and a nice cadre of higher education and research institutions. But there has been mediocre performance in translating R&D successes into marketable products, compared to other states with large R&D operations—this problem is addressed to some extent by the commercialization programs discussed later. Finally Georgia has little to no traditional pharmaceutical and bioscience firms, in relation to competitive states. In addition to using many of the tools other states are using to develop their biotechnology programs, Georgia’s focus on bioinformatics and agri-biotechnology may minimize the harms (although still great) previously identified (such as lack of venture capital and lack of traditional pharmaceutical industries). Products generated in the fields of bioinformatics are generally diagnostic and are “platform technologies.” These products, in most cases, are not processed through the FDA approval process. The same is true for some products produced by agri-biotechnology research. Because the FDA does not regulate many of the anticipated products of bioinformatics and agri- biotechnology research, the significant venture capital (on the order of hundreds of millions) may not be needed to bring a product to market. Based on the information reported by other states, such focused efforts within the field of biotechnology are not present in other state’s initiatives. Most initiatives are relatively broad in nature—they do not focus, in most cases, on sub-sectors of biotechnology.
  9. 9. Venture Capital & Tax Incentives Despite the fact that Georgia’s focused approach may minimize the need for venture capital in its biotechnology development efforts, venture capital access will likely persist as a problem. It is a recognized phenomenon that venture capitalists’ investments are generally concentrated in well-recognized centers of research, development, and industry (E&Y). The fact that Georgia has not amassed a concentration of well-recognized research and industry is a contributing factor to its lack of venture capital. While some may argue that venture capital access for biotechnology will increase substantially in the near future (E&Y), the boom and subsequent bust in the information technology sector may make investors hesitant. Biotechnology may not experience the same welcoming and boom in investment that information technologies experienced in the 1990s. A recent report demonstrates that in the year 2000 that only 36 of 79 biotech firms attempting an IPO (initial public offering) had the venture capital backing. This is a new phenomenon—“attempting a public offering, without the weight of VC backers, is the new biotech M.O.” (Musero). While this phenomenon may be temporary, the effects of venture capitalists’ behavior are exaggerated for biotech firms originating from outside the core of biotech activity. While the “Bioscience Strategic Framework” may provide dedicated access to venture capital for some biotechnology firms, it is likely that Georgia’s lack of access to adequate venture capital will persist for some time. While Georgia does offer tax incentives (a tax credit for certain research expenditures), the benefit is not as great as that offered in other states. Tax incentives are used in other states as a tool for recruitment and as financial assistance for start-up firms. Georgia offers a 10% tax credit on research expenditures; unused credits can be forwarded for 10 years. A ten percent credit is lower than that offered by many states. California, for example, offers 100% tax credit for research activities (BIO). Tax credits on research activity, such as these, are the most common found in other states. In addition to tax credits on research activity, some states offer property tax exemptions for research facilities or expansions and sales tax exemptions on certain research equipment purchases. These tax incentives are not currently offered in Georgia. Because Georgia has identified a dearth of biotechnology and pharmaceutical industry activity, special incentives should be considered to step-up efforts in the recruitment of biotech-related firms. Commercialization Programs Georgia is among a many states that have commercialization programs. These commercialization programs are established to address what is seen as a problem translating R&D to marketable products. Georgia’s commercialization programs and
  10. 10. start-up assistance programs are intended, in general, for any potential product in the field science and technology. Its programs are limited in size, compared to competitors. For example, Georgia has reported that is now has a full-time employee dedicated to assisting biotechnology firms. This pales in comparison to North Carolina’s effort—North Carolina offers 40 full-time staff dedicated to commercialization and assistance programs. While Georgia’s industry and industry potential may not warrant such a level of staffing at this time, none of Georgia’s commercialization programs focus exclusively on biotechnology. Georgia, however, does recognize the need to ease the transition from R&D to the market. While in its infancy and now limited in size, the Faculty Research Commercialization Program may be a model that Georgia can use to dedicate for biotech commercialization. Biotech as a Target Cluster Georgia’s biotechnology initiative is clearly a response to growing competition and opportunities around the United States in this emerging sector. While, in the end, the efforts may prove to be successful, there may be cause for concern as Georgia succumbs to a “bandwagon” effect. The choice to targeting the biotechnology industry may have initially been the product of intuition (good or bad)—to be later confirmed as a potential target cluster. While it is certainly not unconventional for economic development choice to be made in such a manner, this method of targeting may cause concern for those that seek the optimal or better of choices to target for cluster development. Bergman and Feser define clusters as “a group of firms that produce similar products (.e., industries), but that hold key complementary informal and formal ties. The clusters may include some limited supplier chain characteristics, but this in many cases, is less important than identify ties between similar producers.” This perspective is important in light of the means by which biotechnology has been chosen as target for development. In all accounts of the decision-making process, there has been no mention of analysis and comparison to other “good cluster targets” for development. While this is not surprising, what follows is a series of questions about the likely effectiveness of a biotechnology cluster, especially in light of its potential opportunity costs (i.e. other opportunities for development ignored or passed over by the choice to develop biotechnology). Bergman and Feser emphasize that review process and studies of potential clusters “tends to document a single cluster…with the implication that from a micro- study perspective, significant instances of region-wide industrial clustering may go unrecognized.” Georgia began by identifying biotechnology as a potential cluster—then analyzes and policy discussions followed. While the choice may be valid, a macro-level study in some form like that proposed by Bergman and Feser will lend confidence to the cluster target decision and greater intelligence about the region-wide economy.
  11. 11. While it is easy to speculate, without having completed such a macro-level study or the accompanying input-output analysis, one can easily imagine that other clusters of greater potential and of greater impact on the state economy (as a whole) may have been identified. At the very least, conducting such a study juxtaposed to a proposal to develop biotechnology would lend a means of comparison for opportunity costs and alternatives. The Nature of Biotech Cluster Activity In the wake of the initial deluge of biotech start-ups (following the breakthroughs in the Human Genome Project), economic development research is focusing efforts on understanding biotechnology as a distinct industry. The development of many initiatives (including Georgia’s) began in a time when the Silicon Valley model of start-ups and spin-offs were popular models to use for biotechnology development. After years of experience and many initiatives available for evaluation, it is clear that biotechnology, as a distinct field of industry, carries attributes that may prevent the successes one might find with successful implementation of a Silicon Valley model. Cooke’s evaluation of biotech clusters in the United Kingdom sheds lights on significant attributes that may be relevant for Georgia’s situation. Evaluations of clusters in the U.K. affirmed the understanding that a biotech startup’s “proximity to the science base and capability to transform rapidly potential knowledge into products remain defining characteristics of successful biotech clusters.” The affirmation highlights earlier discussion of Georgia’s commercialization deficits (in comparison to states with fewer R&D funds). Georgia lacks commercialization of any significant magnitude despite ongoing efforts to the contrary—therefore Cooke’s affirmed requisite for rapid commercialization for survival in the biotech industry certainly is not being met. Given that the commercialization programs are severely limited in size (compared to “competitor” states) the potential for closing the gap looks poor from this perspective. Additionally, Cooke affirms that independent biotech firms are dependent upon the large cash-investments required to test and trial potential products—big pharmaceuticals are “cash-rich enough to continue” as the primary providers of venture capital in these clusters. “Big pharmaceuticals are increasingly dependent on smaller technology-driven start-up and spin-off firms” (Cooke). Georgia’s lack of “critical mass” of biotechnology, in general, (not to mention big pharmaceuticals) prevents such a symbiotic relationship from easily forming—considering the clear proximity requirements found in successful biotech clusters. This obstacle of “critical mass” is also addressed by Darby & Zucker’s presentation of the concept of “star scientists” clusters. Most recent developments in Georgia’s initiative indicate that Georgia has recognized the weight of Darby Zucker’s findings—and is responding accordingly. Attracting venture capital for an economy sparsely populated by biotech or biotech-related firms is the beginning of a vicious cycle
  12. 12. —for Darby & Zucker affirm that in order to attract venture capital an economy must have a cluster of already existent activity. More specifically, venture capital is likely to follow a critical mass of “star scientists.” Darby & Zucker describe “star scientists” as those select few “high producers” of research and innovations. Concentrations of these “star scientists” explain the attraction of venture capital in cases like California and Massachusetts---in addition to deficits of venture capital in areas with biotech-related industry concentrations, yet no cluster of “star scientists.” Georgia is in a situation where there is a lack of traditional industry and a lack of “star scientists.” The recent decision to focus much of the Eminent Scholar program recruitment on biotechnology- related researchers may indicate Georgia’s recognition of the critical success factors highlighted in development research. Such a realization and subsequent successful solution may catapult the chances of success to higher levels. However, Darby & Zucker also recognize an additional “vicious cycle” associated with attracting “star” scientists. Just as venture capital follows clusters of “star scientists,” “star scientists” are more likely to co-locate in regions where the necessary support mechanisms are in place for success—this would include access to venture capital, more flexibility in the acquisition / possession of intellectual property, and access to support structures and networks in academia and bio-tech research (Darby & Zucker). Without such structures in place, attraction of identified existing “star scientists” will be challenging.
  13. 13. Conclusion Georgia’s approach to biotechnology development focuses, almost exclusively, on start-up activity. Georgia has a long way to rise in the ranks of biotechnology to become a recognized center of innovation and industry. Starting with research and development to bringing products to market, Georgia is making efforts to streamline the process of innovation. This, however, is not unlike other state’s efforts. In what is and will continue to be a competitive sector, Georgia may need to separate itself from the pack. Georgia’s objectives are ambitious, especially considering the current competition in the field of biotechnology. To expect “Silicon Valley” results starting from a deficit in venture capital and a deficit in traditional bioscience and pharmaceutical industries seems to be a great gamble. Georgia’s strategy is not unlike its competitors—however, its hopes for successes seem founded solely on the notion that it can make great strides in the sub-fields of bioinformatics and agri-biotechnology. With such a leap to make in the competition for biotechnology industry, additional measures could be taken to bolster Georgia’s chances at developing a presence in the field of biotechnology. These measures include ensuring venture capital access for biotechnology, continuing to improve commercialization processes especially for biotechnology, and additional tax incentives that compete with the most successful biotech centers for recruitment of new business and stability of existing firms. Finally, because of the origins of Georgia’s initiative in biotechnology (instigated by nationwide booms in the field), Georgia may have overlooked other cluster activity with greater potential. A region-wide analysis of cluster activity may provide Georgia with a better understanding of the potential effects of biotechnology—as well as other cluster activity. This potential oversight in comprehensive evaluation is highlighted by findings from Cooke and Darby & Zucker regarding cluster activity. Because Georgia is starting at a significant deficit, the vicious cycle of attracting star scientists and venture capital begins, in part, because of a inherent lack of traditional industries. While the Eminent Scholar’s Program may begin to attract some star scientists, (using the same descriptor) the requisite “star” support structure may not be in place to attract a critical mass of “star” scientists of sufficient quality. While this discussion is overwhelming critical, it necessarily describes a situation where Georgia’s initiative, heavily funded, yet lightly evaluated (in some dimensions) may fall short of an ambitiously set goal. A macro-level study (ex ante) may have given a more grounded perspective on Georgia’s prospects as a competitor—and provided opportunity costs for alternative industrial development initiatives (of potentially greater impact). Given the significant investments made, being made, and to be made in the biotechnology initiative, a more thorough mid-course analysis may be warranted to provide a much needed reality check for Georgia’s prospects as biotech competitor.
  14. 14. References Bergman, Edward and Edward Feser. Industrial and Regional Clusters: Concepts and Comparative Applications. ( 1999. Accessed October 2001. Biotechnology Industry Organization (BIO). “A Survey of State Initiatives.” ( Accessed September 2001. Bowie, Larry. “Press Release: Georgia Tech Opens Home for Bio-initiative.” Georgia Institute of Technology. Atlanta. October 8, 1999. Bryant, Julie. “Georgia Rolling Out Biotech Plan.” Atlanta Business Chronicle. Atlanta. October 5, 2001. Cate, Molly. “Incubator Hopes.” Nashville Business Journal. Nashville. October 19, 2001. Dibner, Mark. “The Future and the Biotechnology Industry.” Biopharm. Cleveland. “June 2001. Cooke, Philip. “Biotechnology Clusters in the U.K.: Lessons from Localisation in the Commercialisation of Science.” Small Business Economics. 2001. 17: 43-59. Darby, Lynne and Michael Zucker. “Individual Action and the Demand for Institutions: Star Scientist and Institutional Transformation.” American Behavioral Scientist. February 1997. Vol 40: 502-513. Ernst & Young. “The Economic Contributions of the Biotechnology Industry to the U.S. Economy.” May 2000. Estades, Jacqueline and Shyama Ramani. “Technological Competence and the Influence of Networks: A Comparative Analysis of New Biotechnology Firms in France and Britain.” Technology Analysis & Strategic Management. Vol. 10. No. 4. 1998. Georgia Tech Research . “Bioinformatics: The Art & Science of Decoding Life.” Georgia Research Alliance. ( Accessed October 2001. Leigh, Nancey Green and Joy Wilkins and William Riall. “The Development Potential of Georgia’s Biotechnology Industry.” Georgia Tech Research Corporation. Atlanta. February 2001. Melcer, Rachel. “Biotech Incubator struggled from the Start.” Business Courier. Cincinnati. October 26, 2001.
  15. 15. Musero, Frank. “Biotech Filings Reveal Lack of VC Funding.” The IPO Reporter. New York. November 12, 2001. National Human Genome Research Institute (NHGRI). “Understanding Our Genetic Inheritance.” National Institute of Health. ( Accessed October 12, 2001. Puisis, John. “Bio Tech’s New Business Model.” Pharmaceutical Executive. Eugene. October 2001. Vollmer, Sabine. “With Sector in vogue, firms seek cash.” The Business Journal. Raleigh. November 2, 2001.