Business leader: Incubators and hubs for small and medium-sized enterprises are all the fashion

The current wave of mergers and acquisitions – particularly in the pharmaceutical sector, but also to some degree in fine and speciality chemicals – highlights the growing importance of small and medium-sized enterprises (SMEs) in the business landscape. 

Larger firms are increasingly looking to their smaller cousins to take on the high-risk early stages of researching new products, applying a ‘survival of the fittest’ strategy: successful start-ups are signed up as partners, or eventually bought out in their entirety, while those that don’t make the cut fall by the wayside.

While this strategy may be good for decreasing the risk factor in large companies’ R&D portfolios, it creates uncertainty and risk in the labour market. When large companies merge with each other, or buy out a smaller firm, there are almost inevitably job cuts as the companies try to create ‘synergies’ or ‘cost savings’. When an SME fails, or when it moves into different phases of product development that require different expertise, its staff can find themselves out of a job.

So what happens to those people? In an ideal world, just as one crop of companies is consumed, others are emerging or expanding. If you’re lucky, your employer is part of the growing trend for research-intensive firms to congregate in certain geographies – the chemical and biotech hubs of Boston–Cambridge and south San Francisco in the US; Montreal and Ontario in Canada; and the Oxford–Cambridge–London triangle in the UK are prime examples. 

These hubs have advantages for both large and small companies. The aggregation of SMEs makes it easier and more cost-effective to build the local support infrastructure that small firms need to help them get off the ground and grow, and goes some way to supporting fluidity in the labour market.

But for the unlucky, outside of the hubs or forced to choose between staying and going when their employer relocates to a hub, the situation is more difficult. Not everyone is in a position to up sticks and move. The cost of living in these hub areas is generally high, and people have families to consider. There are a multitude of other reasons people would rather stay put. So what then? Find another chemistry-based job (competing with former colleagues who were also left behind)? Retrain and change career? Start up your own business? There are very few easy options.

That’s not to say it can’t be done. UK sites vacated by Pfizer in Sandwich and, more recently, AstraZeneca in Alderley Park, are being transformed into incubators for science start-ups. They join the many other successful examples of this model outside of the fashionable hubs. SME tenants can take advantage of flexible space and centralised service provision, and can tap into local, national and international support networks, such as those provided by the Royal Society of Chemistry’s EnterprisePlus programme.

But this raises another important point. The companies setting up in these incubators are often founded by ex-employees of the sites’ former inhabitants, who are now capitalising on the skills and expertise they acquired and, importantly, the training they received in big pharma. But SMEs rarely have the resources to invest in training significant numbers of young graduates. If the larger firms continue to do less in-house research, and therefore train fewer chemists, then the future generations of SMEs on which they rely will find it harder and harder to succeed without external support.