Nature this week reports on research by my co-author, David Hsu (Wharton), and my new colleague, Kwanghui Lim (MBS). Here is an extract: 

For decades, founders of biotechnology companies have sought a winning formula for their enterprises. The key to success has proven elusive, however. Capable management and good relations with early investors are usually considered essential. But, according to one study, the factor that correlates most closely with a company’s success is the diversity of skills encompassed by its research team. …

The authors show that by hiring researchers from various scientific disciplines (for example, experimental genetics and information technology), a company increases its chances to complete an initial public offering and have a drug approved by the US Food and Drug Administration. …

They looked at patent data to determine how many different scientific disciplines were built upon for each technological innovation; inventors are required to cite existing technologies that their patents build on in the same way that research journals require authors to include references. The authors found that the more scientific fields referenced by a company’s patents, the more likely the company was to succeed. And they found that hiring a diverse group of researchers during the early stages of a company’s development contributed most to its ability to “use ideas from one technical domain to innovate in another area”. Surprisingly, obtaining venture capital backing or forging collaborations with other firms had little effect on the tendency to innovate. …

That somewhat defies conventional wisdom: venture-capital deals are supposed to provide access to networks of people that can assist young companies. And partnerships with other firms ought to have a similar effect. Hsu and Lim suggest that venture-capital backing can actually damage innovation by encouraging a focus on short-term success, whereas alliances with outside companies are often established to access marketing or manufacturing capabilities, not new knowledge. …

The authors believe their study will help biotech executives modify how they budget their research dollars — although private investors may give such work short shrift. “Most of us investors read these types of study and gain some insight, but they’re not driving our decisions,” says Steve Burrill, chief executive of Burrill & Company, a San Francisco-based merchant bank that specializes in biotechnology. He thinks the most important single corollary for success in a young biotechnology company is the quality of its management. “It’s better to have mediocre science and a balanced team then one Nobel prizewinner with no support.”

Now that is what I call “knowledge transfer” Glyn Davis! The Hsu-Lim paper can be found here.

Kwanghui will be taking over from me as an Associate Director of the Intellectual Property Research Institute of Australia. A great asset to that organisation.