1960 1968 TOYO JOZO
Schering-Plough Whitehall
2001
1994
GMP
2004
1994
220
90 30
1995
170 70
2001 2004 2013
20%
80% 30
2013 234
1995
Ibid. 5
5
%
1997 2012
220 20
4.29 21.95
9.4% 20.77%
EPS 0.54 1.87
1295 2012a/9/17 2012
2013 236
1994
2004 2010
90
30% 2010b
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
90 2000 TOT TTY Oncology Team
2006 TOT TOT
TOT 2007
2008 2010
http://www.tty.com.tw/index.php
2013
liposome
91 1997
92
1998 Lipo-Dox
Liposomal Doxorubicin 1999
2001 Lipo-Dox 93
2004 1998
2000 2005 25%
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
91 Liposome lipid bilayer Dr. Bangham
1965
hydrophobic hydrophilic
2013 244
92 TLC 1997
2012 Ibid. 243-247
93 Lipo-Doxa Liposomal Doxorubicin 2001
Doxorubicin
80 120
Ibid. 237
94
2005
Biosimilar95
2013 2003
NRDO No Research
Development Only PEP02 Liposome irinotecan
Merrimack PEP02
2011 FDA EMA
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
94
2013 7 23
95
2013 213 TFDA
51
Orphan-Drug Designation96 1993
2012
55%
22% 2013
2012
2014
2015
Merz 2012
320
2012b 2013
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
96 http://www.pharmaengine.com/ch/Default.aspx
007
2014 PIC/S GMP
PIC/S GMP
PIC/S GMP PIC/S GMP
(1) D
(2) A
(3) C
(4) B
1980
2007
4
1, Introduction
Taiwan’s economic development has been described as a SME-based model that is full of entrepreneurship, indicating the spirit to create a new organization such as
new firms (Schumpeter, 1950; Aldrich 2005). This entrepreneurship also shows clearly in the pharmaceutical industry. The pharmaceutical industry can be roughly divided into two sectors: the conventional pharmas that are mainly producing and marketing chemical small molecular generic drugs, and those newly formed biopharmaceutical science firms that are targeting developing and producing new drugs by using biologics method. Both types of firms in Taiwan are very small in terms of revenue and capacity. For example, in 2010, the total revenue of Taiwan’s pharmas was only about NTD$ 65.7 billion (about USD$ 2.2 billion, 1 USD=30 TD) (Biotechnology Industry Study Centre, 2011:20). The revenue of the biggest pharmaceutical firm in Taiwan, Yung Shin Pharmaceutical( ), in 2010 was only NTD$ 3.3 billion (about USD$ 110 million).
The newly formed and state-promoted biotech firms are not much different.
Since the mid-1990s, the state has begun to promote biotechnology as one of its pillar strategic industries in order to further upgrade the economy into an innovative-driven one. Together with the transformation of the value chain in biopharmaceutical industry in the world in which the R&D and manufacturing activities97 can be outsourced to elsewhere, many Taiwanese firms have been created by domestic and overseas scientists to take the advantages of the state’s financial support for promoting this industry (Wong, 2005, 2011; Chen and Wang, 2009; Wang, et al, 2012). In 2010, the average number of employee of these biotech firms was only 68.4,
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
97 Contracting out of research and manufacture activities have been a salient phenomenon in today’ pharmaceutical industry. A contract research organization (CRO) is an organization that provides research services for pharmaceutical firms on a contract basis. A Contract Manufacture Organization (CMO) provides services for manufacturing, clinical testing, and other related to manufacturing process on a contract basis.
whereas the average revenue was only NTD$ 65.7 million. In addition, the investments from venture capital to those science firms were very small as compared those of investment into semiconductor. For instance, in 2005, only 35 cases in biopharmaceutical industry gained the investment from venture capital firms, which was about 7% of the total 413 cases. The sum of the investment was only NTD$860 million, which was about 8% of the total NTD$ 7.6 billion (TVCA, 2006: 71-77).
These two sectors of the pharmaceutical industry have very different degree of knowledge in nature due to the scientific progress. The conventional pharmas emerged in the 1950s when Taiwan began to industrialize. Many nascent businessmen started their own businesses simply copied the drugs in the market without even had the necessary knowledge. However, the biotech firms are essentially based on frontier knowledge, which derived from the biological revolution in the 1970s. Most of Taiwanese new biotech firms were built in the 1990s, and the founders tend to be those scientists returned from the U.S.
In addition, these two typed of firms also appeared in different historical time that had very large different degrees of state support. In the early 1950s and 1960s, Taiwan government did not have specific policy to support pharmaceutical industry.
The nascent entrepreneurs had to depend upon themselves to create their own firms.
In contrast, the biotech firms have been the targeted pillar industry that the state wants to promote since the 1990s. Therefore, a lot of policy supports have been given to this newly emerging biotechnology.
Given the above differences, what we are interested in are the following questions: are those nascent entrepreneurs in the conventional pharmas different from
those bio-scientists in biotech firms in creating and running new firms in terms of economic actions? We assume, because all firms are social products in which entrepreneurs are embedded in social relations, therefore, they must have some significant similarities. The purpose of this paper is aimed to compare and analyze the role of social capital has played in the formation and development of the two sectors of the pharmaceutical industry in time. The fundamental question that this paper wants to tackle with is: whether social capital is essential for the initiation of a business in Chinese society such as Taiwan, regardless of the type of knowledge of the industry? Next section of this paper will discuss the role of social capital in the formation and development of new firms. The third section lays out the history of the development of Taiwan’s pharmaceutical industry and the state’s role in its development. The fourth section will discuss the role of social capital in the formation of traditional pharmas in terms of capital investment and marketing. The fifth section will discuss the emergence of newly formed bio-science firms and the role of social capital. The six section is to compare and conclude the similarities and differences between these two sectors.
2, Social capital and entrepreneurship
Entrepreneurship is indicated the creation of new organizations, and those people who create these organizations are called entrepreneurs (Aldrich 2005: 452). These nascent entrepreneurs confront various problems in creating these organizations, including gathering and analyzing information, collecting necessary capital, and recruiting essential personnel, as well as forming the business organization to compete and survive in the market. The nascent entrepreneurs have to confront two
major problems: one is to discover effective routines in order to reduce uncertainty;
the other is to build ties with the business environment in order to gain recognition from the market (Aldrich 2005: 467; Thornton, 1999). The first one relates to learning and the second legitimacy. Among the existing various resources that nascent entrepreneurs can get in order to create their business, social capital is the most effective channel that an entrepreneur can mobilize.
The concept of social capital has been widely used in social sciences, which may be used to indicate various conceptual levels and to explain totally different phenomenon (Woolock, 1998; Bebbington, et al, 2004). Therefore, social capital does not have a clear, undisputed meaning and there is no commonly agreed upon definition. In a very general sense, most definitions of social capital in the existing literature stress on social relations that have productive benefits. Or more precisely, as Knorringa and von Staveren suggest (2006:46), social capital can be defined ‘as the set of social relations that enables entrepreneurs to gain, maintain or expand access to economic resources, which are used by entrepreneurs to reinforce the productivity of these economic resources.’ Therefore, social capital indicates relationships and the innate resources in the relationships rather than the property of individuals (Lin, 1999), the latter can be described as human capital. Although the concept of social capital does not exclude that individual property is important in generating economic effect, it nonetheless still stresses the relationships which can effectively reduce transaction costs, enable knowledge learning, enhance gathering of financial capital, and reinforce collective action, etc.
There are two forms of social capital: bonding and bridging (Putnam, 1993; Burt,
2004; Storper, 2005; Knorringa and van Staveren, 2006; Woolock, 1998; Bebbington, 2004). Bonding social capital emerges from strong social ties (Granovetter, 1985), which are based on similar background or type of persons, for example, based on similar basis of family and kinship, gender, ethnicity, religion, and interest.
Sometimes, this type of social capital can be referred to as ascribed group which has a strong social cohesion that can generate strong trust among individuals. This trust is much similar Guanxi as used in Chinese term, or “I trust you because you are a member of my clan” (Knorringa and van Staveren, 2006:19).
In contrast, bridging social capital emerges from weak social ties across society, or ‘people unlike ourselves’ (Storper, 2005:33), which nevertheless held together through the sharing of some minimum common values. Since weak ties exist among people who are heterogeneous, having different identifications, and belonging to different groups, bridging social capital thus can generates social contacts that are not redundant, and in the end it can create new values. If bonding social capital is based on inter personal and strong trust, then bridging social capital is based on a type of generalized trust which occurs mostly at the meso- and macro-level. Horizontally, this networking relationship may occur among loosely connected individuals and organizations; vertically, it may be created in the links of a value chain (Knorringa and van Staveren, 2006:20).
In the existing literature, scholars tend to regard bridging social capital has higher economic value than does bonding social capital. It is because bridging social capital connects people and organizations that have various and sufficient types of resources beyond the personal reach of the economic actors. Nevertheless, bridging
social capital requires that economic actors are familiar with the strong ties of bonding social capital. Because only the latter can provide the actors with the necessary social capabilities, including interpersonal trust and sociability, to connect to other people. The bonding social capital within the groups provides people the social basis to extend their relationships to others outside their group. In other words, the benefits of the bridging social capital is built upon the bridging function that link two separate and isolated clusters, which Burt (2004) describes as a structural hole.
It is argued by many authors that bonding and bridging social capitals play different types of role in the evolution of the industrialization process. In the initial stage of development, entrepreneurs may depend much on bonding social capital to create a business due to high trust among family members, relatives, friends, and their mutual awareness of a common goal. What the nascent small- and medium-sized enterprises need is not a smaller amount of capital and a very complicated knowledge on production which the entrepreneurs’ personal network is able to offer. However, when the economy moves to a higher level of development and the firms are entering into higher level in the global value chain, the existing bonding social capital may not be enough to provide the entrepreneurs enough resources. Intensified international competition makes firms to engage into risky market which beyond the capability of bonding social capital can afford. Entrepreneurs have to find new resources to fund their new adventures, for example, in stock market or via joint ventures. Therefore, a successful transformation of the enterprise demands a transition from bonding to bridging social capital (Storper, 2005; Knorringa and van Staveren, 2006; Woolock, 1998) .
In addition, when an entrepreneur intends to enter into a new technological area or in higher level goods of the global value chain where new expertise and knowledge are out of reach from the entrepreneur’s bonding social networks, the entrepreneur may find himself have to look for information from various, including global, sources.
That said, entrepreneurs tends to depend on bridging social capital to finance their new businesses even when the firms are small and their firms are knowledge intensive types. A summary of the relationship between social capital and entrepreneurship can be shown in table 1.
Table 1: social capital and entrepreneurship
SME Large
Less knowledge intensive Bonding Bridging Knowledge intensive Bridging Bridging
Although social capital provides low transaction cost and enhances knowledge learning for the enterprise, it nonetheless has limitations. First of all, too strong bonding social capital will create lock-in effect that is not fruitful for an enterprise to grow and to learn new knowledge. That is, too high the level of bonding social capital will hamper the bridging social capital to emerge and will be harmful for the enterprise to enter into new position in the global value chain. Second, a strong bonding social capital will generate opportunist behavior that is based on high trust.
Therefore, the bonding social capital will lead to its own fatal destiny without a proper sanction system. Therefore, how to carefully build and reformulate two types of social capital is an issue that may largely affect a firm’s development.
Any enterprise is built in particular time within a particular institutional environment. As Stinchcombe argues, ‘organizations which are founded at a particular time must construct their social systems with the social resources available’
(quoted from Aldrich, 2005:466). Nascent entrepreneurs adopt resources wherever they are able to receive. They however must overcome many obstacles to survival as they seek to build a new form of organization and a niche for their business in the severe competitive world market.
What are the role of bonding and bridging social capital play in creating and developing the business of conventional and biotech pharmas? Do conventional pharmaceutical and biotech firms show similar type of social capital in the creation and development of the firms? In this paper, we will use three dimension of the firm to show the similarities and differences between these two types of pharma. The first one is how the nascent entrepreneur collects the initial capital, which will show how he/she mobilizes social relations. The second is how the entrepreneur gains the necessary knowledge and the role of social relations in the knowledge networks. The third is the firm’s marketing relation that will show how the entrepreneur sells the products and the social relations in the marketing strategy. Our study will investigate how have bonding and bridging social capital played the roles in the above three dimension of both types of firms’ development and evolution.
The data of this paper have been collected mainly by field studies in Taiwan during July 2011 and July 2012. A total of over 34 informants were asked by semi-organized questionnaires, through face-to-face or telephone interviews. Each interview was done by the authors within one or 2 hours. Our informants were mainly
composed of high rank executive managers of enterprises, industrial researchers and university professors.
3, The development of Taiwan’s pharmaceutical industry
Taiwan’s modern pharmaceutical industry started from the Japanese colonial period when the Japanese introduced modern medical system into this island. During that period, most pharmas were Japanese owned whereas Taiwanese in this industry were mainly engaged in distribution and marketing. After 1945 when the Kuomintang regime took over power, the existing 13 Japanese pharmas were reorganized into one firm to be owned by the state. In addition, many private-owned pharmas emerged afterward, producing cod liver oil, vitamins and other medicines.
From the 1950s on, the state began to encourage the establishment of new pharmas in order to fill the increasing domestic demand. Therefore, many new pharmas were established and began to produce generic drugs by collaborating with foreign pharmas, especially the Japanese, in order to learn knowledge from foreign firms (Fan, 2001; Han, 1999; Yu, 1972). Until the early 1960s, there were over 600 small pharmas in Taiwan. In 1960, the state began to take a more liberal export-oriented industrialization policy, through which many foreign firms began to invest in Taiwan to take the advantage of tax incentives. In 1961, the state invited the American Cyanamide Company to establish a joint venture firm with Taiwan Suger to produce antibiotics. This was the first Taiwan-US joint venture case in the pharmaceutical industry. Later, many Japanese pharmas, such as Takeda (1962),
Tanabe (1962), Yamanouchi(1963), Shionogi (1964), and U.S.’ Pfizer (1964) also followed suit. Taiwan’s pharmas began to differentiate into domestic-owned and foreign-owned firms. In the early 1970s, there were as many as 750 pharmas in Taiwan. In 1982, the state launched the Good Manufacturing Practice (GMP) policy in order to regulated the chaotic pharmaceutical industry and to standardize the procedures in manufacturing drug production. This measurement had ousted many pharmas, there were 163 pharmas that had gained cGMP certification in 2005.
Taiwan began to promote the development of biotechnology in the early 1980s, as Wong (2011) describes, a betting for the future industrial upgrading. But it achieved very little degree of success (Wong, 2005; Chen and Wang, 2009). It was only in the mid-1990s when the state legislated the “Promotion Program for Biotechnology,” known simply as the “Biotech Action Plan (1995)” that the state’s determination was felt and the biotechnology industry began to take off. The main strategies taken by the state were to subsidize firms’ R&D expenses, provide tax incentives and low interest rate for lending, induce venture capital to support biotech industry, etc. In 2006, Taiwan’s emerging biotech sector had 253 companies, with a total revenue of US$1.21 billion, in which many of them were created by overseas returnees from the U.S., and almost all of them were small and medium sized companies. Also, among the newly emerged biotech firms, many of them were created after late 1990s and were in the field of biopharmaceutical industry (Wang, et, al, 2012).
Therefore, as described above, these two sectors of the pharmaceutical industry
emerged and developed in very different historical background with different degrees of state’s support. The conventional pharmaceutical industry emerged with the initial stage of industrialization, along with other industries; whereas the bio-pharmas were regarded and promoted by the state as the strategic industry that intended to upgrade the economy. With the different development background in mind, we now turn to the story of these two sectors.
3, The Conventional Pharmas
There are some common characteristics of the conventional pharmas when the nascent entrepreneurs started and ran their own businesses. First of all, the initial capital was mainly generated from the founders’ savings, or collected from relatives and friends. The feature was very much similar with other small- and medium-sized family firms that emerged in Taiwan during the same period in which bonded social capital was an essential element (Chen, 1994; Shieh, 1991). Secondly, the founders themselves did not necessary have the needed medicine knowledge, this had to do with the low entrance barrier of this industry during Taiwan’s earlier stage of industrialization. However, as the pharma began to expand, bridging social capital played an important role as the founder had to find friends or experts to run the business. Sometimes, the founder demanded their children to study medicine in order to have sufficient knowledge to run the business. Conventional pharma showed very clearly family owned business characteristics. Third, the conventional pharmas used very traditional guanxi approach to do the marketing, particularly in selling the medicines to clinics and hospitals. That was, the salesmen were very important in
building relationship with the clients (hospitals) in order to expand and retain the sales volumes. This section will use qualitative data to show the above features of Taiwan’s conventional pharmas. We will use the case of three firms, Yungshin, Wuchou (UC Phama), Sintong Chemical (Taiwan Biotech) to illustrate the above features.
3-1 Initial Capital
A, Yungshing Pharma
The founder of Yungshin Pharma was Mr. Lee, Tien Der. Born in a poor family of Dajia town in central Taiwan in the Japanese Colonial period, Mr. Lee went to
The founder of Yungshin Pharma was Mr. Lee, Tien Der. Born in a poor family of Dajia town in central Taiwan in the Japanese Colonial period, Mr. Lee went to