Abstract
Alliances between pharmacological and biotechnology companies promote productivity growth for both parties and, as a rule, increase performance by introducing innovations and strengthening market positions. However, certain tensions and challenges may arise in such partnerships, and several factors cause problems within such partnership collaboration. According to Burns et al. (2011), today, many new alliances are formed, which “allow pharmaceutical firms to gain access to innovations while enabling biotechnology firms to gain access to capital, clinical trial expertise, and the marketing capabilities” (p. 342).
Among the key tensions that arise between two parties, it is necessary to highlight different production indicators members, difficulties in the distribution of leadership roles, and challenges in sharing profits. Based on the assessment of the complexities encountered by ongoing and novice alliances, it is possible to determine the main directions of activities. This work has practical significance as a guideline for business market participants and the members of trade unions.
Introduction
Alliances as part of individual large and small companies’ organizational culture represent quite broad prospects for development in case of a competent application of the opportunities that such cooperation provides. If a firm is ready to collaborate with another corporation, this can be beneficial for both parties; however, with the irrational use of available resources and the wrong mode of operation, the outcomes of this practice may be negative. Accordingly, to maintain high productivity and achieve high-quality production rates, it is crucial to take into account the consequences that alliances can bear in particular industries.
Concerning the pharmacological sphere, which is quite a successful field, alliances play an important role in forming the potential growth of individual firms and developing an innovation base. Such collaboration is a profitable mechanism that stimulates the promotion of individual corporations and the expansion of their sphere of influence.
Burns, Bradley, and Weiner (2011) give an example of alliances between pharmacological and biotechnology companies and argue that today, this type of cooperation is a frequent form of business. Based on the results of the case study conducted by the authors, a large percentage of such firms forge mutually beneficial trade relations that help them promote their products and develop commercial activities (Burns et al., 2011). Nevertheless, it should be noted that any alliance has certain conditions, despite its flexibility.
The challenges arising from the interaction of pharmacological and biotechnology companies may have a different background, which, however, is essential to overcome to make profits. This work is aimed at describing the tensions resulting from the considered alliances and the ways of addressing them. Overcoming difficulties in alliances is a significant task for both parties since the growth of profits and an innovation base largely depends on the ability to find compromises and support each other’s business.
Major Tensions in Alliances Between Pharmaceutical and Biotechnology Firms
Any commercial company has the main purpose of making a profit and maximizing it. In the pharmacological field, creating medicines is a long and rather costly process. It means that the risk of making a new product in this industry is sufficiently high. Therefore, large manufacturers seek to achieve not only stable sales but also safe production based on creating high-quality and popular products. As Burns et al. (2011) note, for instance, medicines for fighting cancer have a constant demand among the population because patients are willing to pay any money for an opportunity to overcome this dangerous disease.
At the same time, relevant innovations are constantly required since the bioengineering market is dynamic, and new products developed by competing firms may crowd out outdated counterparts. For this purpose, pharmacological companies enter into alliances with biotechnology organizations. Despite the potential of such cooperation, tensions can arise even among those partners who have been collaborating for a long time.
One of the challenges that arise in the process of interaction between pharmacological and biotechnology companies is not sufficiently high productive indicators performed by one of the parties. For instance, if innovations developed by engineers for implementation in the health sector are poorly implemented by pharmacologists, this creates tension and may lead to a break in partnership agreements. As Cui, Yang, and Vertinsky (2018) remark, production similarities are important criteria for maintaining a stable alliance, and the lack of sufficient efforts on the part of one side can cause discontent with the other one.
Another potential difficulty that may manifest itself is the distribution of leadership roles. Although, as Burns et al. (2011) argue, alliances are dynamic systems without tightly regulated operating principles, governing rules may cause disagreements between the two sides. The work of biotechnologists is an essential part of the healthcare sector since relevant research innovations are developed, and new valuable mechanisms for helping people are created.
At the same time, pharmacologists perform a significant amount of work, combining current developments with innovations, controlling the production process of medicines, and performing other crucial tasks. In this situation, each of the parties may insist on its right of leadership in the alliance, and such differences may lead to a conflict based on managerial interests.
Finally, the tension associated with the distribution of the share of profits is another potential challenge. Scillitoe, Gopalakrishnan, and Santoro (2015) give an example of the situation when a biotechnology firm may lose control over its products, which may be beneficial to a pharmacological company in terms of increased earnings. As a result, disagreements arise based on the income distribution, and the stability of the alliance may be under threat.
Overcoming all these tensions and timely activities aimed at identifying potential disagreements are important practices for both parties. Otherwise, not only do the firms involved in the conflict experience difficulties but the entire health care system because necessary goods are not produced, and the introduction of innovations is inhibited.
Ways of Addressing Tensions in Alliances
The evaluation of the activities of the considered alliances involves finding the best ways of minimizing the aforementioned tensions to create a comfortable working environment. Burns et al. (2011) give an example of the successful partnership of Gen-Probe and Novartis, the companies that have been cooperating successfully for over twenty years. The basis of their fruitful alliance consists of effective strategies for the distribution of functions and responsibilities, which, in turn, increases the value of all the activities and contributes to obtaining significant profits for both ventures. Therefore, it is essential to provide those working conditions that will stimulate adopting mutually beneficial decisions and will not allow disagreements to affect the course of business.
The increase in production indicators may be achieved by drawing up a working plan that could fit the capabilities and capacities of both parties. For instance, if a biotechnology company is not able to produce the necessary equipment in a certain volume, it is required to create the algorithm that might stimulate the growth of the resource base to achieve the desired results.
Concerning a pharmacological organization that has joined the alliance but is not able to work productively enough, it is necessary to involve additional resources, for example, to expand the staff to increase performance. As Cui et al. (2018) note, the market capacity of joint ventures directly depends on their ability to operate in a single rhythm. Therefore, creating the conditions for providing both parties with the necessary material and human resources may help minimize tension.
Leadership roles that cause disagreement between the members of alliances also need to be distributed following the capabilities and forces of both parties. For instance, if the representatives of a pharmacological company are well aware of demand in the market and can determine the necessary volume of the required products for selling, responsible creative managers and supply chain organizers can be appointed from among them.
At the same time, biotechnologists probably understand the principles of labor and production well enough, which is one of the reasons for appointing them as human resources and departmental control systems managers. In general, as Scillitoe et al. (2015) state, leadership transparency is a valuable component in alliances since all bias is excluded. Therefore, appropriate conditions for the organization of control and management are to be maintained.
Regarding the tension associated with a financial issue, in particular, the distribution of the share of profits, honesty is the key to a long and productive partnership. According to Cui et al. (2018), first of all, both sides of the alliance should determine what strategy they intend to support – to receive immediate profits or invest in a long-term perspective. Further, partners are to draw up a special plan for recording current income and potential sources of profit to have an idea of all the costs and earnings. Finally, a single bonus system may help strengthen the team spirit of alliance members and contribute to improving employee performance.
Responsibility not only for individual products but also for the activities of the partner is an incentive to increase productivity. Therefore, the honest principle of the division of income following a profit share is the best practice to avoid tensions on a financial basis.
Challenges of Maintaining an Ongoing Alliance vs. a New Relationship
When comparing long-term partnerships between pharmacological and biotechnology companies and the new alliances, these types of trade interactions have distinctive work nuances. To maintain a stable activity, the participants of the two types of associations have to overcome various difficulties since at the initial stage, goals are usually less ambitious, and more tasks should be solved. Comparing the two categories of alliances may allow determining the range of challenges that their members need to combat.
Ongoing alliances that have been operating for many years have an established supply chain, a stable customer base, and a reliable mechanism for sharing experience. However, in such a partnership, it is difficult to create new strategies of interaction since those practices that have advanced over the years have crowded out other and potentially effective mechanisms of activity. For instance, it will be problematic for companies that support the course on innovations to focus on one specific area of activity and support it by investing in its development. Besides, the appointment of responsible persons may be difficult because the training of new employees and teaching them all activity algorithms is long and laborious.
For novice alliances, strengthening partnerships is complicated by the difficulties encountered in start-up projects. In particular, the establishment of supply chains, the allocation of resources, and work with a customer base are those tasks that are not easily achieved in a highly competitive environment and the lack of collaboration experience. The leaders of new alliances are to regulate their activities in such a way as to obtain a stable profit and minimize the cost of unnecessary costs. However, today, as Burns et al. (2011) argue, quite many partnership agreements are signed between pharmacological and biotechnology companies, which testifies to the desire of both parties to develop business and achieve higher market positions.
Conclusion
Alliances between pharmacological and biotechnology companies are a popular trend in the modern market, but those tensions and difficulties that arise in the process of cooperation create inconveniences for a successful business. Among the key challenges, leadership problems, profit sharing, and productivity are crucial factors that the members of these trade unions may face. Finding compromises and resolving issues at an early stage helps to maintain a high level of productivity and a mutually beneficial partnership. The goals and objectives of development are different for ongoing and novice alliances, and in both cases, distinctive challenges need to be addressed to achieve optimal trade interaction.
References
Burns, L., Bradley, E., & Weiner, B. (2011). Healthcare management: Organization design and behavior (6th ed.). Boston, MA: Cengage Learning.
Cui, V., Yang, H., & Vertinsky, I. (2018). Attacking your partners: Strategic alliances and competition between partners in product markets. Strategic Management Journal, 39(12), 3116-3139. Web.
Scillitoe, J. L., Gopalakrishnan, S., & Santoro, M. D. (2015). The impact of external contexts on alliance governance in biotech-pharmaceutical firm alliances. Organization Management Journal, 12(3), 110-122. Web.