The importance of clustering

The GEN website recently published a review of the top Biopharma clusters in the US, Europe and Asia which was based on R&D spending, money made from IPOs and the number of patents, jobs, and companies in the biopharma sector. China took top spot in Asia with close to $340 billion in R&D spending and 7500 companies generating 250, 000 jobs in 2013. It also made the most money through IPOs ($2.7 billion by 18 companies) though it did lose out to Japan in terms of patents ( 30, 627 vs 154, 918 from Japan). Japan came second to China netting $160 billion in R&D spending with 552 companies. India ranked third, with its fair share of generic manufacturers and some successful biotechs. This was followed by South Korea, Taiwan and Australia. Interestingly, Singapore came in at 8th position, even behind Malaysia! This may be attributed to its small size, fewer companies and fewer jobs. R&D spending of $8 billion however far outstrips Malaysia that invested only $1.192 billion and the presence of many multinational pharmaceutical corporations have made Singapore a key hub in Asia.

In Europe Germany came up tops, especially pleased to see Bavaria was one of the top clusters, in terms of number of biotechs and patents. UK came in a close second with its Cambridge-Oxford-London bioclusters, spending more on research compared to Germany. France has done well to come in third, followed by The Netherlands, Switzerland, Italy, Belgium, Denmark, Sweden and Ireland. In the US, as expected the Boston-Cambridge area sees the greatest biopharma activity with highest VC spending ($1.8 billion in 88 deals). San Francisco came a close second, followed by New York and San Diego.

The importance of clusters was first coined by economist Michael Porter who indicated that despite the ease in doing business on a global scale, clustering businesses in a physical location was still important as it introduced a variety of factors that increased competitiveness and productivity. In essence, having clusters enabled better access to skilled employees, suppliers and insider information. After the workshop, I see this to be true for Munich’s biotech sector. People having set up many companies before are willing to share their experience with new business owners, at times even investing in new start-ups themselves. This creates more businesses and drives innovation. Having face-to-face contact is also seminal for creating business relationships. And with appropriate physical and social infrastructure often established with governmental aid, a cluster provides an effective and conducive environment for negotiating business deals and increasing output. Competition is also a key factor, similar companies in the same vicinity are hard-pressed to keep up with their competitors to achieve their share of the market. In this way, they are forced to stay up-to-date with the latest technology and in fact are constantly searching for innovations to boost their advantage, creating the best possible service/product as a result.

A key critique of Porter’s model however is that he never addressed the importance of multinational factors. With that in mind, he had in his book “The Competitive Advantage of Nations” been rather skeptical about Singapore’s progress, citing advancement would be limited by its poor resources. He had focussed only on what Singapore had at the time, a low-cost, semi-skilled workforce and efficient transportation infrastructure. Over the years however, Singapore has obtained vast success mostly stemming from foreign investment as well as Singapore’s investments abroad.

The Singapore biopharma cluster is mostly focussed around the Biopolis/Fusionopolis/Science Park area which is located somewhat central west of the island. Despite large investments by foreign MNCs, there is still limited biotech activity though this may be growing with companies like ClearBridge Biomedics that seem to have a pretty solid base and a cool website to boot. There seems to be some governmental aid judging by initiatives such as this one that provides physical facilities such as hot-desk space, free internet and unlimited coffee. However I suppose it will be a way to go before we achieve the same intensity of clustering seen in China, Germany and Boston. Alot of it I think comes simply from scale and amount of human resource and technology. But I suppose for a tiny island we ain’t doing too bad!


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