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Kellogg on Biotech

The Criticality of Non-Market Strategies: The European Biotechnology Patents Directive (PDF 105 KB / 16 pages)

by Shail Thaker KSM '03

In sectors such as commercial biotechnology, it has become evident that strategies to deal with non-market issues should be a critical part of the business plan. Since government and therefore public sentiment heavily influence regulatory oversight, it is essential to understand the opinion forming processes of these influencers. In the case of the public, the societal significance and audience interest of an issue can predict the likely coverage in the media, while the government’s opinions are formed as a direct result of the net effect of information provided to them by a variety of interest groups with differing priorities, agendas and power. An understanding of the processes involved allow development of strategies that can shape the regulatory and legislative environment of emerging businesses while ignoring this can lead to commercial inviability. Being adept in dealing with non-market issues can form the basis of sustainable competitive advantage, which is in turn translated into shareholder wealth creation.

This paper applies widely accepted non-market strategy frameworks to a case from the more nascent days of the life-sciences/biotech industry, namely the European Biotechnology Patents Directive. In this case, the management of non-market issues overlapped with the critical areas of intellectual capital management and legislative strategy and gives a useful example of how activists and lobby groups use non-market strategies to pursue their agenda, in this case to block key legislation. Interestingly it also shows how an industry does learn to use non-market strategies, it can defeat entrenched opposition.

The case details the nature of the legislation, its development and introduction into the legislative arena, the interest groups that formed coalitions both for and against it, and the tactics each used up to the first failure of the legislation to be passed. We then apply analytical frameworks to predict what should be the rational response of a company in the pro-legislation coalition, to ensure the successful passage on the second attempt and compare it to the actual outcome.

©2007 Kellogg School of Management, Northwestern University