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

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  • Gopesh Anand

    (College of Business, University of Illinois at Urbana–Champaign, Champaign, Illinois 61820)

  • John Gray

    (Fisher College of Business, Ohio State University, Columbus, Ohio 43210)

  • Enno Siemsen

    (Carlson School of Management, University of Minnesota, Minneapolis, Minnesota 55455)

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.

Suggested Citation

  • Gopesh Anand & John Gray & Enno Siemsen, 2012. "Decay, Shock, and Renewal: Operational Routines and Process Entropy in the Pharmaceutical Industry," Organization Science, INFORMS, vol. 23(6), pages 1700-1716, December.
    • Handle: RePEc:inm:ororsc:v:23:y:2012:i:6:p:1700-1716
    DOI: 10.1287/orsc.1110.0709
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