Decay, Shock, and Renewal: Operational Routines and Process Entropy in the Pharmaceutical Industry

Gopesh Anand · John Gray · Enno Siemsen

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Innovation and Knowledge Management Regulation and Compliance Studies Management and Organizational Studies

Abstract

In this study, we examine decay in adherence to operational routines over time. Our empirical setting is the worldwide pharmaceutical industry, and we focus on operational routines used to maintain product quality. Based on an analysis of longitudinal data from U.S. Food and Drug Administration (FDA) inspections, we find that the tendency of operational routines to decay is widespread. Our results also illustrate that FDA inspections act as external renewals that halt decay in adherence to routines. In addition, manufacturing plants are found to vary significantly in their level of decay. Using data on mergers and acquisitions affecting these plants, we find that mergers appear to cause decay in adherence to routines. However, acquisitions appear to serve as renewals and halt such decay. Based on our overall findings, we present theoretical implications for research in organizational routines and practical insights for companies and regulatory authorities.

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1983An Evolutionary Theory of Economic Change.1955A BEHAVIORAL MODEL OF RATIONAL CHOICE 1983An Evolutionary Theory of Economic Change 1996The Use of Knowledge in Society 1963A Behavioral Theory of the Firm 1982An evolutionary theory of economic change 1996Prospering in Dynamically-Competitive Environments: Organizational Capability as Knowledge Integration 1985Normal Accidents: Living with High Risk Technologies

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