The Institute of Management & Strategy (IoMS-HSG) has invited Prof. Thomas Keil to a research seminar at the University of St. Gallen. Thomas Keil is tenured full professor and holds the Chair in International Management at the University of Zurich.
What exactly is the problem? Performance feedback and multiple subgoals.
Prior research on problemistic search has often failed to investigate how organizations map performance feedback to problems to devise suitable organizational responses. In this paper, we investigate how organizations use performance feedback regarding multiple subgoals of the R&D process related to early and late stages of the clinical trials process to identify problems and devise distinct organizational responses depending upon the underlying problems they identify. Specifically, performance feedback below aspirations only for the part of the portfolio of drug candidates that is currently at early stages of clinical trials informs the firm about safety problems that commonly arise from excessive exploration and, therefore, may require rebalancing the portfolio towards lower levels of exploration intensity -defined as the share of new drug candidates in the future portfolio of the firm that have not been previously approved by the Food and Drug Administration (FDA). On the other hand, feedback below aspirations only for the part of the portfolio of drug candidates that is current at late stages of clinical trials indicates efficacy problems that may arise when the firm underexplores and, therefore, may suggest a change of future portfolio composition towards an increase in exploration intensity. Finally, when feedback from both early- and late-stage trials is below aspirations, the firm may face a more fundamental problem with the quality of its overall discovery process, that is the part of the R&D process that precedes pre-clinical and clinical trials and, as a result, may respond by increasing the relative emphasis on externally sourced drug candidates. We find support for these predictions in a sample of the R&D portfolios of 98 large U.S. pharmaceutical companies during the period of 1993 to 2013.