The Biotechnology Industry seems to suffer from large upswings and downswings in firm performance, public perception and returns on investment. Whilst on the one hand there is a clear need to address basic agro-food demands in the world, there are also concerns over the effects of developing genetically modified strains of food crops for the wider environment. This review attempts to provide a broad holistic account of these divergent demands, especially concerning where the impetus for the development of the industry is sourced. This is undertaken by using ideas from international political economy. These ideas are then compared with a survey of US National Association of Securities Dealers Stock Market (NSDAQ) quoted biotechnology firms. The conclusion is reached that the industry is very much focused on the relationships between the US, EU and Japan (the Triad), with little interactivity to firms based outside of these regions. However, this does not imply that none Triad firms are not engaged in effective biotechnological activities, but that the form of these activities is significantly different.

What is International Political Economy?

International political economy is a school of thought that was revived in the 1960s by academics and policy makers dissatisfied with post war separation of politics from economics in policy making. At a time of rising international activity, outside the direct scope of national dictations and driven in part by increasing attempts at political co-operation in Europe, Africa and Latin America, a better way of linking political activities with economic rationales was needed. Key developments in this school of thought was the linking of technology with production means (Gilpin, 1987) for example, whilst Susan Strange, one of the leading thinkers in this discipline, proposed a four interlinked branch model as a basis of linking politics with economics in 1988 (Strange, 1988). This model has become a popular focus in international political economy.

A four factor model

Susan Strange's model argued that however we look at the international environment and the industries that operate in this arena, we are essentially asking ourselves questions of:

• Where is the knowledge in the industry? Who develops it? How much does it cost ?
  
• Who has the necessary production facilities?
  
• Who can offer finance and credit support for such industries and by implication, who has the capacity to deny such finance?
  
• What are the internal and external security implications of the industry?

Within this model, we can see elements of Marxism (control of the means of production) and realism (control of security) for example. Overall, the four themes are argued to represent the sources of power in a given industry. An effective country or firm that is able to supply the necessary factors for all four issues, would be argued to be a strong position compared to other firms and countries. In effect, they would be able to dictate the nature of the emergent market. As such, they would possess structural power. Where a country or firm has a more limited capacity to effect change in the biotechnology industry, this structural power is constrained and may for example only be effective within a given region (say the European Union (EU)) or through access to one of the four factors. Such firms or countries then have relational power. Their capacity to shape the market is determined by immediate regional concerns or constrained to a limited set of the four factors.

Updates to the model, sought to expand on the relationships between actors who have mixtures of structural and relational power. For example this will include, the governments involved in the international industry, the firms involved and international and non governmental organizations (NGO).

Using the four factor model

We can take the ideas from this model, and look at the driving factors in the biotechnology industry.

Access to knowledge, its creation and effective exploitation are important considerations for the biotechnology industry. Biotechnological knowledge requires large resources, extensive laboratories and infrastructure plus a supportive regulatory environment within which to develop and test the new products. The US, largely via the World Trade Organization's (WTO) Trade Related Intellectual Property Regime (TRIP), has been a focused advocate of ensuring firstly, that effective appropriation rights to new knowledge in all markets of the world (which has meant countries that acceeded to the WTO, must now implement a suitable set of Intellectual Property (IP) instruments). However, there are concerns that this does not provide enough indigenous rights to less developed countries nor their biotechnological firms. In some cases, some countries have developed IP systems that are in conflict with the TRIPs agreement. In other cases, like the EU, after a decade long struggle, 1998 saw the passing of the European Directive on Biotechnological patents, which was reflective of the US system. In essence, this provides an equally supportive environment for EU firms to compete with their US rivals. Arguably, moral and ethical concerns were subsumed beneath competitive ones in the final draft of the directive.

Secondly, the structural power of the US and US biotechnological firms is further highlighted in the knowledge factor, by the reluctance of the US to sign the Convention on Biological Diversity - a particularly important issue, when most of the world's new organic compounds for medicines are sourced from the biological resources of less developed countries. In this case, there is the paradox that the actual control of the biological resource in less developed countries, does not reside with those countries.

The findings of the sample of US NASDAQ firms highlights that the exploitation and even development of new biotechnological products is squarely focused upon operations with EU and to a lesser extent, Japanese firms. With Japan in particular, this tends to be for distribution purposes largely rather than R & D or manufacturing because of the controls in the Japanese market.

Security in the biotechnology industry includes the enforcement of rights to protect intellectual property, to the development of a Biosafety Protocol when dealing with the use and release of genetically modified organisms in nature. There is clear evidence on the extensive development of international links between countries to develop preferred biosafety protocols. In the EU for example, the Central and East European countries have adopted largely unchanged, the EU directives on these issues. This helps harmonize their markets to preferred EU norms in return for strategic market access to the EU. More broadly, there is also evidence of such preferred practises with ex-colonial countries, through international research programmes such as PRAP (Pacific Regional Agricultural Programme) sponsored by the EU in Caribbean countries. In the Americas, the CamBioTec initiative sees the regionally powerful Canadian Institute of Biotechnology through the International Development Research Centre (IDRC) supporting preferential activities with five Latin America countries.

A closer review of the activities of biotechnology companies from less developed countries (Brazil for example), highlights that they are acting in a fashion more reflective of their subservience to relational and structural power activities of external actors (either foreign firms or governments). This is highlighted by their actions as technology and knowledge transfer conduits to the research base of the country / firm rather than the reverse in the developed countries.

Moreover, when we look at production in the biotechnology industry, the powerful position of developed countries and their firms is again evidenced. The high tolerances needed for producing biotechnological products, means much of the activities and discoveries of smaller biotechnological firms are manufactured by larger concerns with the necessary production infrastructure and control procedures. By taking a stake in such production, the grip of such firms in the international area is strengthened.

Finally, the extent, control and direction of investment in such firms, as the fourth factor of finance and perhaps seen to be the most globalized competitiveness factor, is questioned when we review reports on the origins of such investments. The majority still tend to be regionally specific, with less than 10% of US private investment funds in 1995 leaving the country in the high technology industries. Governments remain a major source of basic research funding for the industry, which continues to exhibit poor investment returns. Hence the role of governments in the four factor model, continues to be important in shaping structural and relational power within the industry.

Public opinion and Biosafety

Concerns of the public and the degree to which they are integrated into company operations varies region to region. Whilst the acknowledgement of the need to be more reflective of these concerns has been acknowledged by governments and firms alike, there is as of yet, little evidence to account for this. In particular, the nature of risk for example in biosafety within the EU and the US does not extend, beyond the immediate effects of such GMO products in their environment, to consider longer term potential repercussions. It is for this reason, that public perception, whilst a factor underpinning firm and country competitiveness through the development of a supportive biotechnological regulatory environment is important, it is argued to be a secondary concern and one that moreover, varies in different regions of the world. It is not a key structural factor in shaping the nature of the biotechnology industry.

A final observation to make on the emerging nature of the biotechnology industry and the importance of linking politics with economics, is to consider the momentum within it. The actual investment returns highlighted by the sampled firms, stressed the poor economic performance of such firms, yet there is tremendous political momentum to maintain the policies and investments favouring such firms despite this apparent poor performance. Perceptions of the industry as being strategic, say as the Information Technology sector was in the late 1970s and early 1980s, modify this economic return by clear political motivations. Accommodating secondary concerns of public perception and safety are subservient to these objectives.

Conclusions

This review has highlighted how the biotechnology industry can be examined in terms of the interaction of four key competitive factors: production, knowledge, security and finance in biotechnology. The importance of these factors varies from region to region in the world, although effective control over all four factors endows that firm or country with an extensive capacity to shape the emergent biotechnology market environment.

The strong position of the US either directly in terms of the Federal Government or American Biotechnological firms was discussed, but we also noted the indirect effects of international organizations like the WTO and UN in shaping this market system as well, where the US has been able to adopt a strong proactive or strong inhibitive action through its control over the four competitive factors. This makes the market environment very difficult to adjust in favour of different countries and their firms. In the EU, for example, collaborative programs have been launched that attempt to exploit strategic location or ex-colonial links to develop and transfer preferred market structures to those countries. Arguably, the US and US origin firms maintain structural control of the emergent Biotechnology market, whilst firms from the EU or Canada for example, have powerful relational positions in the biotechnology market.