Objectives
The current financial crisis makes the analysis of the role of stock markets in the innovation process all the more relevant and urgent. The crisis calls into question both the liquidity of stock markets and the investment behavior of institutional investors. In particular, we will analyse how these crisis-induced changes affect the finance of innovation processes in the ICT and biotechnology industries. GREThA will carry out these meso-level studies of the ICT and biotech industries for the European Union, with two different approaches: by firms in these industries on one side, and the institutional investors' strategies on the other side. In the case of ICT industries, the focus will be on the established companies and new ventures in the communications technology industry.
Description of work
Study of the ICT industry and the functions of the stock market
Research in this WP will study the ICT industry to show how the five functions of the stock market are affecting strategic control, organisational integration, and financial commitment among established companies and start ups. In the case of the ICT industries the focus will be on the established companies and new ventures in the communications technology industry. In previous work on the United States, Lazonick has shown how the role of the stock market introduced a high degree of speculation into the ICT industries in the last half of the 1990s as established companies used their stock as a combination currency to acquire unproven technology companies and as venture capitalists, in part encouraged by this acquisition strategy as well as by the possibility of a quick IPO, backed many new ventures which, in retrospect, had scant prospects of developing revenue-generating products. The same approach will be implemented in the biotech industry.
Analyse the role of institutional investors in financing innovative activities in ICT and biotechnology industries
Specifically, Work Package 5 will analyse the link between concentration of shareholding, the presence of institutional investors in the capital of firms and investors' strategy to extract value. Special attention will be given to:
- analysing the influence of institutional investors on innovation: do they really exert strategic control over resource allocation?
- the profitability of investors' portfolios in these two industries.
Study institutional investors' strategies before and after the current financial crisis
The study will analyse the extent to which institutional investors reduce their holdings in ICT and biotechnologies industries, and the implications for the finance of innovation in these sectors.
Examine the link between the financing of innovation and alliances in the biotech industry
Recent data demonstrate that the number of alliances per firm has indeed gone up significantly, and it is common to find large firms managing over 500 alliances simultaneously. This research will look at the complex alliance network dynamics in a major sector of the biotech industry to examine how alliance networks evolve with the entry and exit of firms in the sector and how the global network experiences, and is affected by, a turn-over of key players and the innovation life-cycle.
Work Package leader: Claude Dupuy, University of Bordeaux
