Shaping Nascent Industries: Innovation Strategy and Regulatory Uncertainty in Personal Genomics

Abstract

In nascent industries―whose new technologies are often poorly understood by regulators―contending with regulatory uncertainty can be crucial to organizational survival and growth. Prior research on nonmarket strategy has largely focused on established firms in mature industries, but such strategies are apt to differ for new ventures, which generally have limited resources and market power and operate in novel domains in which the rules of the game are underdeveloped. How do new ventures navigate regulatory uncertainty? To explore this question, we conduct an inductive, multi-case research study of five ventures that pioneered the nascent personal-genomics industry. Drawing on extensive qualitative data, we develop an emergent theoretical framework that elucidates how ventures navigate evolving regulatory uncertainty. Grounded in a power versus industry-evolution logic, this framework illuminates how ventures’ strategies for doing so vary and theorizes why certain strategies appear more effective than others. In doing so, we also introduce a novel logic of interaction— regulatory co-creation—that ventures can employ to shape emerging regulations. Taken together, our theory and findings challenge existing perspectives on strategy in nascent industries, shed light on the dynamic interplay between market and nonmarket strategy, and recast the relationship between ventures and regulators during the emergence of new technology industries.

Market-Shaping as Meta-Strategy : A Strategy of Strategies

“…These spillover effects can be unintended (Tóth et al, 2022), but can also be intentionally generated by a focal company to create and leverage synergies (Baron, 1997;Dorobantu et al, 2017). This synergistic use of market-and nonmarket-shaping activities is representative of an integrated strategy (Baron, 1995a;Gao & McDonald, 2022). This is in line with most depictions of marketshaping strategies in the extant literature as seen in Paper I and II and the empirical data in Paper III and IV.…”

“…Conversely, market-shaping strategies could also be considered as nonmarket strategies, since many market-shaping cases involved activities aimed at shaping the political and regulatory landscape (Humphreys, 2010;Doganova & Karnøe, 2015). However, as most market-shaping cases encompass activities relating to both, a market-shaping strategy could be best categorized as an integrated strategy (Baron, 1995a;Gao & McDonald, 2022).…”

“…An integrated strategy combines actions aimed at the market and nonmarket environment to generate synergies as both environments are interrelated and the shaping of the nonmarket environment can support the shaping of the market environment and vice versa (Baron, 1995b;Helfat, 2021;Gao & McDonald, 2022).…”

“…While such integrated strategies have received renewed research attention in recent years (e.g. Funk & Hirschman, 2017;Oberholzer-Gee & Yao, 2018;Gao & McDonald, 2022), studies have mostly focused on actions aimed at the political and regulatory landscape (Holburn & Vanden Bergh, 2014;Baron, Neale, & Rao, 2016;Funk & Hirschman, 2017;Oberholzer-Gee & Yao, 2018). In contrast, research on the market-shaping phenomenon has shown that the shaping of the nonmarket environment and the generation of synergies goes beyond the regulatory and political environment.…”

Strategic organization, dynamic capabilities, and the external environment

“…Instead, Pfizer’s regulatory capability helped the company to adapt to a change in the external environment, namely, a pandemic. However, in other cases pharmaceutical and biotechnology firms may work with regulators to craft regulations for new product categories (Gao and McDonald, 2022), thereby shaping the external environment for all firms in the market.…”