Leveraging desorptive capacity: how New Zealand and Australian life science innovators build relationships with multinational companies

Abstract

The life sciences industry is a two-sided market for innovation. Small innovative companies partner with large multinational corporations (MNCs) in order to access markets and commercialisation capabilities, while MNCs seek profitable innovation opportunities. The success of this process depends on the small and large firms’ desorptive and absorptive capacity, respectively. However, despite professed intentions to source innovation globally, MNCs tend to overlook Australia and New Zealand (ANZ), owing to a range of perceptions, including a lack of unique, commercially viable opportunities. Therefore, both the ANZ region and its life science innovators (ANZSMEs) face obstacles to securing investment. Despite the strategic importance of such investment, the literature provides limited insight into the strategies used to build desorptive capacity in general, and specifically about the strategies used and barriers faced by ANZSMEs. In response, this study provides insight into relationship building between ANZSMEs and MNCs, and contributes to the literature on desorptive capacity. A case study of the relationship building process employed by ANZSMEs informs the research, including a survey of 32 ANZSMEs, seven in-depth interviews, and participant observation of intermediary firm activities. The study contributes to the emerging literature on desorptive capacity by focusing on SMEs rather than large companies, addressing a gap in current understanding. ANZSMES were highly active in approaching MNCs, but often do not make strategic plans or perform research for these approaches. Effective communication was crucial to achieving critical success factors: rising above competitive clutter presented by multiple global opportunities, and establishing trust for unproven technologies from unknown sources. As the deal negotiation process is protracted, so initial contact early in the product development process provided opportunities for progress updates. Three innovator communication archetypes were identified (Story-Teller, Navigator, and Organiser). ANZSMEs therefore need to better identify target MNCs’ pain points and unmet needs; and based on that, consider how to best adapt their approaches to highlight their points of difference and build trust in their technology. As regions compete for MNC investment Government can provide greater support by raising awareness for ANZ as a region of life science innovation excellence and supporting ANZSME's business development activities.