Academic journal article Review of Business & Finance Studies

Tracing the Trajectory of Industry Leader's Drug Innovation Capability: The Amgen Corporation Case

Academic journal article Review of Business & Finance Studies

Tracing the Trajectory of Industry Leader's Drug Innovation Capability: The Amgen Corporation Case

Article excerpt

ABSTRACT

The origin of organizational capabilities remains elusive to strategy managers and scholars. Because of this elusiveness, a scholar has questioned: "where [do] capabilities come from [and] what kinds of investment in money, time, and managerial efforts is required in building them" [Ethiraj, et al. 2005, Strategic Management Journal, 26, 25-45]. Using the lens of the upper echelon theory, this case provides evidence that Amgen's President hired "stair-scientists" who then developed the first drugs that launched Amgen as the global biopharmaceutical industry leader. This way, this case study contributes answers to the questions raised by Ethiraj and colleagues (2005). In sum, this real-world case discussion has practical significance to managers and academics alike.

JEL: MOO, Ml, M2

KEYWORDS: Upper Echelon, Drug Innovation, Capabilities, Network Capabilities

INTRODUCTION

On one hand, copious literature suggests that non-imitable and non-substitutable organizational capabilities are the bedrock of inter-firm sustainable competitive advantage and performance (see, e.g., Barney, 1991; Wernerfelt, 1984; Rumelt, 1984; Dosi, Nelson & Winter, 2000; Nelson & Winter, 1982; Henderson & Cockburn, 1994). On the other hand, research suggests that the extant strategy literature is not clear where in the organization the answers to the following practical questions- can be found (Ethiraj, et al 2005): (1) Within the organization, where is the starting point of organizational capability? (2) Within the organization, what types of asset and resources are necessary to build organizational capabilities? (3) Outside the organizational boundary, what role does social capital (Granovetter, 1985;Coleman, 1988; Uslaner, 2003) play in organizational capability building strategy? (4) Are external ties and networks of top managers critical to the development of organizational capabilities? Our paper makes contributions by providing answers to the above questions in the framework of archival data on Amgen.

The reminder of this paper is organized as follows. The literature review section discusses works on the fusion of theory and managerial practice-pertinent to the research questions examined in this discussion case. Following this, data and methodology section presents the data sources and methodology used in the study. Next, the results of the study are articulated. Finally, a concluding section wraps up the discussion case study as it underscores the academic and managerial significance of the study.

LITERATURE REVIEW

To address the questions posed in this case discussion, a fusion of theory and managerial practice was used especially answers the questions posed by Ethiraj and colleagues (2005). Answers to these critical questions are important for a number of reasons. First, because the extant strategy literature is at best silent on the answers to these questions, they represent gaps in scholarly knowledge on the development of organizational capabilities. Second, it has been established that the development of theories that managers can apply is among the major objectives of the strategic management discipline (Hofer & Schendel, 1978; Chandler, 1990; Leonard-Barton, 1995). To this end, scholars agree that sound knowledge of the theories of the origins of organizational competitive advantage rooted in capabilities- is critical (Cockburn, Henderson & Stern, 2000; Teece et al. 1997). In deed, Mahoney and Sanchez (2004:34) cautioned that "theory building in strategic management should also recognize that inquiry from the inside [of the firm] is vital in developing integrative capabilities and more integrated strategy theory." That said, they also stressed that "researchers interested in developing useful strategy theory" should gain rich insights from the managerial actions of practitioners in the real business world, as discussed in the present case study. Of course, this is not an entirely new proposition because landmark works in strategic management grounded on practical insights of practitioners have long been documented (see for e. …

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