Visualisation of Linkages in Networked Clusters: Analysis of the Biopharma Cluster Ecosystem in Cork John Hobbs & Eoin Byrne

Parallel 4.1 New Cluster Policies and Cluster Evaluation

12 November 2014

VISUALISATION OF LINKAGES IN NETWORKED CLUSTERS: ANALYSIS OF THE BIOPHARMA CLUSTER ECOSYSTEM IN CORK

DR JOHN HOBBS & EOIN BYRNE

EUROPEAN PROJECTS RESEARCH UNIT

DEPARTMENT OF MANAGEMENT & ENTERPRISE

CORK INSTITUTE OF TECHNOLOGY, IRELAND.

DATE: 12/11/2014

Traditional Cluster Analysis

Traditional Porterian cluster analysis focused on the INTERNAL workings and competencies of a cluster and its local boundaries

Informs and Develops Policies Based on Regional Strengths

Economic Analysis: • Location Quotients• Input / Output• Regional Employment• Patents• Case Studies

Visualisation of Linkages in Networked Clusters

V-LINC supplements traditional Porterian cluster analysis by adding an EXTERNAL analysis:

Informs & Supports Local/National Policy Development with an International Perspective

European International

Informed policy development within the

context of regional strengths + dynamics

National

Traditional Porterian Analysis + V-LINC Analysis = Contextual Policy

=

Measuring input and output linkages has provided the backbone to traditional Porterianresearch studies on concentrations of industry.

Derived from Marshall’s (1890); Porter’s (1998) and Leydesdorff (2012) each of which recognisethe role of knowledge, innovation, collaboration, administrative supports and specialised inputs.

What Types of Linkages does V-LINC Measure?

• V-LINC data collected through structured interviews.

• Measure the business value of linkages as perceived by company personnel.

• Using likert scale questions derived from Porter’s (1998) industry cluster theory.

How V-LINC measures the Business Value of Linkages

= 36/40

= 31/40

= 27/40

= 24/40

Perceived Significance Value No.High >30 to 40 2

Medium >20 to 30 2Low >10 to 20 0

Tenuous >1 to 10 0

Employees Provide Expert Views on Firm

Linkages

Head of Research & Development

Confidentiality kept - Perceived Significance Bands

1) IndividualFirm Analysis

2) MultipleFirm Analysis

Triple Helix Cluster

3) ReportingData Visualisation

Tabular Data

4) Policy & StrategyDevelopment

The Overall V-LINC Methodology

Firm Level

Cluster Level

National Level

European Level

Employees Provide Expert Views on Firm

Linkages SMEs MNCs

Why Apply V-LINC to Biopharma in Cork?• Biopharma an important economic sector

in the developed world (Battelle, 2013;Cannon, 2014).

• Nationally, Biopharma is one of 14 sectorsselected by Government to be a driver ofgrowth in the Irish Economy, in the Reportof the Research Prioritisation SteeringGroup (Forfás, 2012).

• Biopharma also features in Ireland’s RIS3strategy (Forfás, 2014).

• Biopharma is a major industrial sector inIreland with a notable specialisation inCork. Cork stands out as a key region inthe Biopharma manufacturing sector.

• Repeated reference by policy makers ismade to Biopharma clustering in Ireland(Martin, 2004; DETE, 2008; Riordan, 2008;Forfás, 2010; DJEI, 2014).

Applying V-LINC to Cork Biopharma

78 interviews

472 Linkages

0 SMEs

7 Large Firms/MNEs

• Area: 7,500 km²• Population: 519,000• Enterprises: 53• Employees: > 9,600• Policy: State Government – National• Research & Education: 2 Universities• Location Quotient = 3.88

• Maps linkages between firms constituent in a cluster, with organisations they engage with.

• Reports linkages across 8 categories at 4 levels Local, National, European & International

Visualisation of Linkages in Networked Clusters

Applying V-LINC to Cork Biopharma

Distribution of Linkages by Category and by Firm

Note to Table: The eight linkage categories are: Government agencies (GA); Industry association (IA); Industry peers (IP); Inputs (IN); Output (OU); Research & development (RD) Specialist service linkages (SS) and Training (TN).

Company GA IA IP IN OU RD SS TN Total (n)

Amgen 19.1% 21.3% 23.4% 0.0% 0.0% 8.5% 27.7% 0.0% 47

Eli Lilly 10.6% 15.2% 12.1% 9.1% 10.6% 15.2% 22.7% 4.5% 66

GE Healthcare 17.6% 9.8% 15.7% 9.8% 9.8% 2.0% 33.3% 2.0% 51

Gilead Sciences 7.4% 14.8% 6.2% 24.7% 1.2% 2.5% 37.0% 6.2% 81

Janssen Pharmaceuticals 4.0% 5.3% 5.3% 17.3% 8.0% 8.0% 34.7% 17.3% 75

Merck Sharp & Dohme 7.1% 14.3% 17.9% 13.1% 3.6% 1.2% 33.3% 9.5% 84

Pfizer 8.8% 5.9% 7.4% 16.2% 13.2% 4.4% 30.9% 13.2% 68

RFG Average 9.7% 12.1% 11.9% 14.0% 6.6% 5.7% 31.8% 8.3% 30

Total (n) 46 57 56 66 31 27 150 39 472

Most Populous (Rank 1-8) 5 3 4 2 7 8 1 6

= 59 37% Specialist Services

Applying V-LINC to Cork Biopharma

Distribution of Linkage Categories by Geographic Scope

Note to Table: International linkages are those linkages with entities beyond the European Union.

This information is used with the perceived significance to assess the linkage categories.

Geographic Scope Local National European International Total (n)

Government Agencies 30.4% 63.0% 0.0% 6.5% 46

Industry Association 33.3% 35.1% 19.3% 12.3% 57

Industry Peers 50.0% 17.9% 21.4% 10.7% 56

Inputs 27.3% 21.2% 34.8% 16.7% 66

Outputs 6.5% 0.0% 41.9% 51.6% 31

Research & Development 40.7% 44.4% 11.1% 3.7% 27

Specialist Service 58.0% 27.3% 10.7% 4.0% 150

Training 41.0% 38.5% 15.4% 5.1% 39

Percentage 41.9% 29.2% 17.8% 11.0% 100.0%

Total (n) 198 138 84 52 472

What is the dominant geographic scope for each of the linkage categories?

Is there a Biopharma Cluster in Cork?

Porter’s Diamond Model of national competitiveness

1. Factor ConditionsFigure: Input and Specialist Service Linkages: Local, National, European and International

Local

European International

National

Geographic Scope Local National European International Total (n)

Inputs 27% 21% 35% 17% 66

Specialist Service 58% 27% 11% 4% 150

Applying V-LINC to Cork Biopharma

2. Demand Conditions

Applying V-LINC to Cork Biopharma

• 94% of output linkages in this study are external to Ireland • Importance - 100% of European and International linkages in the High and Medium band

Geographic Scope Local National European International Total (n)

Outputs 6% 0.0% 42% 52% 31

Figure: European and International Output Linkages

3. Firm Strategy, Structure and Rivalry

Applying V-LINC to Cork Biopharma

Geographic Scope Local National European International Total (n)

Industry Peers 50% 18% 21% 11% 56

• Cork: 50% of Industry Peer linkages in the Low or Tenuous band.• IP linkages become more important as the geographic level increases.

Figure: Local Industry Peer Linkages

4. Related and Supporting Industries

Applying V-LINC to Cork Biopharma

Figure: Local Industry Association Linkages

Geographic Scope Local National European International Total (n)

Industry Association 33% 36% 19% 12% 57

• Cork: 42% of Industry Association linkages in High and Medium bands.• National 45% of Industry Association linkages in High and Medium bands.

4. Related and Supporting Industries

Applying V-LINC to Cork Biopharma

Figure: Local Research & Development Linkages

Geographic Scope Local National European International Total (n)

Research & Development 41% 44% 11% 4% 27

• Cork: 91% of R&D linkages in High and Medium bands.• National: 75% of R&D linkages in High and Medium bands.

No B2B Research Links in Cork / Ireland

5. Government

Applying V-LINC to Cork Biopharma

Geographic Scope Local National European International Total (n)

Government Agencies 30% 63% 0.0% 7% 46

• Cork: 65% of Government Agency Linkages are in the High and Medium bands.• National: 79% of Government Agency Linkages are in the High and Medium bands

Figure: Local Government Agency Linkages

Geographic Scope Local National European International Total (n)

Perceived Significance

High 30 to 40 10.8% 16.3% 24.7% 26.9% 79

Medium 20 to 30 55.2% 55.3% 54.1% 40.4% 252

Low 10 to 20 30.9% 24.1% 18.8% 32.7% 127

Tenuous 1 to 10 3.1% 4.3% 2.4% 0.0% 14

Percentage 41.1% 29.9% 18.0% 11.0% 100.0%

Total (n) 194 141 85 52 472

Applying V-LINC to Cork Biopharma

Perceived Significance by Geographic Scope of Linkages

The results, suggests that local linkages have less business significance to respondent firmsthan those linkages developed outside County Cork; perhaps this is due to the limitedautonomy of firms within the respondent group, and their strong ownership and tradingconnections internationally.

The table compares the overall perceived significance of linkages at each geographic scope.

Key Connectors in Cork Biopharma Sector

Key Connector PCI UCC C. Chamber IMB CIT IDA C. County

High 30 to 40 20% 44% 0% 57% 14% 33% 33%

Medium 20 to 30 80% 44% 25% 29% 57% 50% 67%

Low 10 to 20 0% 11% 62% 14% 29% 17% 0%

Tenuous 0 to 10 0% 0% 13% 0% 0% 0% 0%

Total (n) 10 9 8 7 7 6 6

Linkage Category6 IA, 2 IP,

2 TN 5 RD, 4 TN 6 IA, 2 GA 7 GA 3 RD, 4 TN 6 GA 6 GA

• Not primarily local demand conditions

• 93% EU and INT.

• Biopharma units in Cork compete with one another for staff to develop better processes, but compete on a global stage.

• Some reliance on local input factors

• IN – 27% local• SS – 58% local

• A connected local industry – 41% of linkages are local. Largest proportion of local linkages in IP 50%, SS 58%, TN 41%.

• Supportive / facilitative government. 64.3% local and 78.6% of national GA linkages are in top two significance bands

A Biopharma Cluster in Cork?

• The authors conclude that there is no Biopharma industry cluster in Cork that accords withthe Porterian model.

Does a Biopharma Cluster Exsist in Cork?

• The evidence points more in the direction of a national Biopharma cluster given the largenumbers of local plus national linkages reported in the categories: industry peers, research &development, training and industry association.

• DJEI (2014, p.20) have set a target to “Build globally competitive clusters and ecosystems forkey sectors, including the appointment of a sector specific Cluster Development Team todrive the initiative across the system”

• Through understanding the nature, scope and perceived significance of the linkages withinthe Biopharma ecosystem in Cork, the researchers can identify actions to strengthen thesector through Porter type linkages.

Policy Recommendations (1)

Develop a Cluster Organisation for the Biopharma Sector in Ireland

The researchers suggest developing a cluster organisation responsible for the Biopharmaindustry in Ireland.

The V-LINC analysis and results highlight scope for a cluster organisation to supportinteractions and collaborations in the Biopharma sector. Very few industry associationlinkages reported in the High perceived significance band (>30 to 40). This recommendationsupports the policy of DJEI (2014, p.20) which suggests that building globally competitiveclusters and ecosystems are essential for Ireland’s economic development.

Figure: National Industry Association Linkages , Cork Biopharma Figure: Local Industry Association Linkages, Cork Biopharma Sector

Policy Recommendations (2)

Enhance Indigenous Services Supply

In order to maximise the opportunity of supplying specialist services to Irish based units ofMNCs. Provide mentoring or assistance in strategy and execution to indigenous companies whoalready supply MNCs in order to secure and increase their levels of business.

Figure: National Specialist Service Linkages , Cork Biopharma Figure: Local Specialist Service Linkages, Cork Biopharma Sector

• 85.3% of specialist service linkages, occur in Ireland.• Further develop the indigenous sector through links with the multinational sector via sub-

supply, outsourcing and collaborative linkages e.g. ‘Dealstart’.

Policy Recommendations (3)

Incentivise Networking and Collaboration for Research in the Irish Biopharma Sector

A regional financial grant to strengthen research linkages for idea sharing and collaboration. Asuccessful application would result in the award of a voucher (e.g. €5,000), to cover the costs offurthering B2B or industry/academic research linkages.

Many supports for research collaboration between industry and academic researchers in theBiopharma sector in Ireland exist, through current SFI, EI and IDA Ireland programmes.• 85% of the 27 Research and Development linkages reported are either local or national.

Figure: Local Research & Development Linkages, Cork Biopharma SectorAll local and national R&D linkages are withacademia and only 4 are reported in theHigh perceived significance band.

The results suggest that it is difficult forfirms to create meaningful researchconnections.

Inspiration can be taken from the co-operation projects run by Clusterland UpperAustria.

Closing RemarksThe analysis of the Biopharma sector in Cork shows evidence of fledgling research,development and innovation linkages. Strategically Ireland needs to strengthen and expand theBiopharma sector in Ireland.

To do so it is imperative that Ireland’s Biopharma MNCcomponent is linked more vigorously with its growingindigenous and specialist services sectors.

An IDA and EI supported national cluster organisationoperating out of Cork or Dublin can be effective inhelping to build such B2B linkages.

Cluster programmes and initiatives can help theBiopharma sector in Ireland leverage more from Horizon2020 programmes and in terms of the specialist servicesfirms internationalisation.

Other Sectoral Applications of V-LINCThe V-LINC software is being used to analyse 5 local clusters in the Cork region.

Further engagement with 7 clusters across Europe through FP7 projects.

• Biopharma• It@cork – European Tech Cluster• IMERC - Maritime• Kinsale - Tourism • WCDP – Agri-Food.

• Be Wiser Project - Paris, Karlsruhe, Barcelona,Cyprus, Slovenia, Northern Ireland and SouthWest Region. www.be-wiser.eu

• REMCAP – MSE, Southampton; IMERC, Cork.www.remcap.eu

Local Cluster Analysis: International Cluster Analysis:

Potential Future Work DirectionsFuture developments of V-LINC could support work in the following areas:

• Dr Bernie Fingleton (University of Cambridge)• Dr Justin Doran (UCC)

Network AnalysisSmart Specialisation

Longitudinal Analysis: Global Value Chain Analysis:

• Dominique Foray (École Polytechnique de Lausanne)• Declan Hughes (Dept. Jobs, Enterprise and Innovation)

• Measure and analyse cluster ecosystem changes.• Impact of specific policies on linkage development.

• Dr Tim Sturgeon (MIT) & Dr Andrew Reamer (GWU)• Louis Brennan (Dublin University)

2014 2016

• Battelle (2013), The Economic Impact of the US Biopharmaceutical Industry, Prepared by Battelle TechnologyPartnership Practice for the Pharmaceutical Research and Manufacturers of America (PhRMA), July: Available online @http://www.phrma.org.

• Cannon, B. (2014), An Industry perspective on the Biopharma sector in Ireland, presented at National Peer ReviewWorkshop Smart Specialisation: Moving Forward and Looking Outward, Dublin, 3-4 July 2014.

• DETE (2008), Knowledge and enterprise clusters in Ireland, Technical report, Department of Enterprise Trade andEmployment: Available online @ http://www.entemp.ie.

• DJEI (2014), ‘Policy Statement on Foreign Direct Investment in Ireland,’ published by Department of Jobs, Enterprise andInnovation, 30th July Available online @ http://www.enterprise.gov.ie.

• Forfás (2014), Ireland’s RIS3 strategy, presented at National Peer Review Workshop Smart Specialisation: MovingForward and Looking Outward, Dublin, 3-4 July 2014.

• Forfás (2012), Report of the Research Prioritisation Steering Group, Available online @ http://www.forfas.ie.• Forfás (2010), Skills in the biopharma - pharmachem sector, technical report, expert group on future skills needs,

Technical report, Available online @ http://www.forfas.ie.• Hobbs, J. (2010), A Framework for the Analysis of Spatial Specialisations of Industry, PhD thesis, Cork Institute of

Technology, Cork.• Martin, M. (2004), ‘AK pharmaceuticals opens engineering centre of excellence in Ireland’, Minister for Enterprise, Trade

and Employment, Micheál Martin, T.D. speaking at the official opening ceremony of AK Pharmaceuticals on the 8th ofOctober.

• Porter, M. E. (1998), On Competition, Harvard Business School Press.• Riordan, M. (2008), ‘Valuable opportunity for linkages with United States’, Radio Interview with County Manager of

Cork County Council Martin Riordan. Red FM on the 23rd of June.

Bibliography

Dr John Hobbs,

European Projects Research Unit, Department of Management and Enterprise,Cork Institute of Technology. Rossa Avenue, Bishopstown, Cork.Mobile: 00353 86 8091294 Office: 00353 21 4335149Email: john.hobbs@cit.ie Skype: jhobbs.cit

Mr Eoin Byrne,

European Projects Research Unit, Department of Management and Enterprise,Cork Institute of Technology. Rossa Avenue, Bishopstown, Cork.Mobile: 00353 86 0719451 Office: 00353 21 4335056Email: eoin.byrne@mycit.ie Skype: eoin.byrne881