Sample Paper on Managing Radical Innovation

Managing Radical Innovation: The Importance of Specialized Knowledge in the Biotech Revolution


Human beings have brought different innovations that have influenced organizational management in various ways. Consequently, the introduction of rDNA in the biotechnology market caused different effects in private investors and entrepreneurs in that they had to deal with inability to gain liquidity in their respective companies. Previous research shows that before the advancement of rDNA in the biotechnology field, most people found it easy to buy shares during IPOs. However, this changed significantly after the development of this scientific method.

This review investigates how the development of rDNA profile brought about tremendous changes in the acquisition of liquidity among private investors and entrepreneurs in the biotechnology industry.

Literature review

The article titled “Managing radical innovation: the importance of specialized knowledge in the biotech revolution” indicates that the development that has brought rDNA in the biotechnology industry also came with significant implications on the ability of entrepreneurs and private investors to gain liquidity in the stock market. However, this was not the case before the advent of this scientific technology as earlier studies showed that investors were able to access shares in the industry easily without any hindrance until this technology came about.

The author of the above named article believed that innovation came about due to specialized knowledge in the society. He also stated that as specialization expanded due to division of labor, certain implications erupted that directly affected the market, investors, entrepreneurs, and the industry as a whole. There existed evidence that when specialized human capital became critical, corresponding agency problems and the issues of systematic information became worse especially between investors and business owners within the given firm. Evidently, increases in critical, tacit, and specialized knowledge in biotechnology, which led to the inability to include secondary investors in the biotech industry, related IPOs followed the breakthrough in the development of the rDNA in the industry.

The author decided to use the logit/probit and tobit regression methods of analyses for evaluating all industrial IPOs that took place during 1970 to 1979, the years before the development of specialized knowledge in the biotechnology industry. He also used the same model of analysis to examine the effects that occurred in the same sector after the scientific development between 1980 and 1987. The results showed overwhelming evidence that it became hard for investors to sell IPOs in the biotechnology industry after the advent of the rDNA development compared to before this technology came to existence. This aspect came about largely due to increases in specialized knowledge brought about by division of labor within industries.

Research questions

The research questions were: has the development of the rDNA made it difficult for investors and entrepreneurs to gain liquidity in the biotechnology industry during IPOs, have increases in specialized knowledge brought any impact in the ability to sell shares in the biotechnology industry during IPOs, and has the development affected markets, entrepreneurs and investors in anyway?

Model and hypotheses development

The hypothesis of the study that included the development of the rDNA method made it difficult for private investors and business individuals to gain liquidity in the biotechnology industry. Specialized knowledge and division of labor also complicated issues in the wake of this development.

The researcher used a mathematical model to investigate the hypothesis and the notions of the effect of the introduction of the rDNA and its effects on businesspersons and new investors in the market. His rationale for using the mathematical model of analysis was aimed at showing the bilateral differences in the sales of shares before and after the development of the rDNA in biotechnology industry. The model was as shown below,

First, the researcher applied the logit/ probit model to investigate the occurrences of the industry between1980 to 1987 after the introduction of the biotechnology model into the market.

Pr (Secondary = 1)i   = βo+  β1 (Ln IPO proceeds)I + β 2 (Venture – Backed)i + β 3 (Top Investment Banker)i +  β 4 (Hot IPO Market Dummy)i + β 5- 9 (Industry Dummies)i + β 10 (Retail/ Rest/ Hotel Sector)i + β 11 (Manufacturing Sector)i +  εi

In the same way, the tobit regression method followed the mathematical model below to investigate the same occurrence in the biotech industry

Secondary Share Percent i = βo+ β1 (Ln IPO proceeds) + β 2 (Venture – Backed)i + β 3 (Top Investment Banker)i +  β 4 (Hot IPO Market Dummy)i + β 5- 9 (Industry Dummies)i + β 10 (Retail/ Rest/ Hotel Sector)i + β 11 (Manufacturing Sector)i +  εi


The method for investigation into the research used available secondary data to analyze the events that took place in the market and the ease of the investors to assess IPOs in form of secondary shares before and after the introduction of the rDNA into the biotechnology industry. The researcher also investigated how the manager used improvement in specialized knowledge to effect these changes and make it possible for private investors to manage activities in the industry.

Results and analysis

The results showed that before the invention of the rDNA in the biotechnology industry, it was easy for investors and businesspeople to gain liquidity and sell secondary shares in the market. The mathematical model showed that secondary shares decreased significantly after the occurrence of the invention method. This also followed years of specialized knowledge based on the techniques of division of labor in the market, indicating that knowledge became so specialized that people had to rely on the new scientific method to aid the development of shares in the scientific market. Similarly, before the advent of this method, the investors and entrepreneurs were able to obtain liquidity by selling secondary shares in the biotechnology market during IPOs. What’s more, during this time, the development of specialized knowledge in the scientific method had not occurred, as is the case in the text.


It is evident that specialized knowledge led to various innovative ideas not only in the biotechnology industry but also in other areas of business activities. Consequently, the innovations also posed various impacts on investors and business individuals during their era as people decide to embrace specialized knowledge more than they did before. The study has also shown that the rDNA came into existence because of people’s creative innovation in the science industry. This made it challenging for those who had not embraced various methods of technological development to sell shares during IPOs in the respective markets. However, research further indicated that when human beings decided to embrace change that came with development in technologies, it became easy for them to find solutions to problems facing them. This is because they can use the same notion of innovation and specialized knowledge to come up with a means of ensuring that no one in any market suffers due to increases in innovation and knowledge speciali