Technological Innovation in the Pharmaceutical Industry: The Use of Organizational Control in Managing Research and Development

Abstract

The literature on the management of R&D professionals strongly advocates managing R&D projects on a project-by-project basis. This literature suggests that projects should be managed differently depending upon project characteristics such as risk, ambiguity, and nonroutineness. While the primary emphasis of the R&D professional literature has been on project teams, the purpose of this study is to examine the impact of organization-wide controls on innovativeness at the firm level. In a sample of 57 pharmaceutical firms, this study investigates the influence of organizational controls on the research and development activities of R&D professionals. This study is one of a handful of studies that simultaneously explores the use of input, behavior, and output controls. Two categories of innovation are considered as dependent variables: incremental innovations in the form of drug enhancements and radical innovations in the form of new drugs. Contrary to existing theory and hypotheses developed in this study, the results show that input, behavior, and output control enhanced radical innovation, and input and output controls enhanced incremental innovation. These results challenge several important features of existing models of R&D management and diverge from common beliefs about R&D management at the project level. While it is commonly accepted that incremental and radical innovation should be managed differently, the results of this study suggest otherwise. In this instance, the management of R&D activities may be considered more similar than previously thought.

Management control systems in innovation companies: a literature based framework

“…But in uncertain situations, a procedure cannot be prescribed and administrative and technical barriers may hamper the production process in unexpected situations. Additionally, of particular relevance for innovation companies, several authors warn that too intensive action control may result in routine actions and a resistance to change (Merchant 1985b;Jaworski 1988;Cardinal 2001;Sarin and Mahajan 2001;Bonner 2005). There is consensus that concentration on action control may lead to an overemphasis of internal processes and the inability of employees to deal with uncertainty (Merchant 1985b).…”

“…It has been confirmed that highly innovative companies train their staff the most (Freel 2005) and personnel control has a positive impact on the likelihood of radical and incremental innovation (Cardinal 2001). Since the importance of personnel control to the generating of innovations seems to be generally accepted, it is hypothesised: …”

“…Similarly, Kärreman et al (2002) acknowledged that MASs support uncertainty reduction and results control applied in an R&D setting was found by Cardinal (2001) to enhance both incremental and radical, innovations.…”

“…On the other hand, more recent research has stressed the role that specific types of MCSs can play, even in highly innovative companies (e.g. Bart 1993;Abernethy and Brownell 1997;Nixon 1998;Davila 2000;Cardinal 2001;Davila et al 2009). In addition, in companies with high knowledge intensity and enhanced needs for organisational learning, management controls were found useful if developed to address the needs of their professionals (Alvesson 1993b;Kloot 1997;Ditillo 2004;Chenhall 2005).…”

The Influence of Social Network Structure on the Farmer Group Participation in Indonesia

“…Organizational structure is regarded as one of the forms of organizational control which aims to encourage organizational members to behave towards organizational goals (Cardinal, 2001). Organizational structure determines how information flows within the organization.…”