Title: A wealth of failures: sensemaking in a pharmaceutical R&D pipeline

Authors: Marc Banik, Randall E. Westgren

Addresses: Department of Management and Technology, Universite du Quebec a Montreal, 315 rue Ste-Catherine est, Montreal, H3C 3PC, Canada. ' Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, 1301 West Gregory Drive, Urbana, IL 61801, USA

Abstract: Shadow options are latent opportunities for investment. Current literature attributes the recognition of shadow options to an option chain – initial investments and experiences that provide opportunities to make follow on investments. This article argues, in contrast, that complementary processes of organisational sensemaking and retrospective analysis of project selection criteria enable R&D firms to increase their ability to recognise shadow options. We propose that R&D pipelines that routinely deal with failure (such as drug development) are more apt to identify new investment opportunities because they enable knowledge acquired in the course of project failures to be rapidly incorporated into future searches for shadow options. Future research should investigate the proposition that the success rate in R&D decreases with experience, since greater experience in dealing with project failures motivates the firm to undertake more financially rewarding but riskier R&D.

Keywords: drug development; organisational cognition; organisational sensemaking; pharmaceutical R&D; shadow options; research and development.

DOI: 10.1504/IJTIP.2004.004925

International Journal of Technology Intelligence and Planning, 2004 Vol.1 No.1, pp.25 - 38

Published online: 26 Jul 2004 *

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