Corporate Governance and the Governance of Innovation: The Case of Pharmaceutical Industry

The paper focuses on some organizationaldynamics that have characterized the pharmaceuticalindustry in the last thirty years, whenbiotechnology and the development of lifesciences have defined a new technologicalparadigm, reshaping many aspects of theindustry, especially the organization ofinnovative activity. We suggest an original interpretation of someorganizational settings, as the increasedimportance of skilled scientists within firmsand the development of inter-organizationalalliances for the division of scientific labor.Following recent theorizing on corporategovernance issues, which points out theintrinsic organizational and relationaldimensions of the resource allocation processesand strategic decision-making, we propose a roleof the organizational practices mentioned aboveon corporate governance, and, in turn, aninfluence of different governance arrangementson innovative activity. We recall moretraditional approaches to the analysis ofcorporate governance, and give a broaderinterpretation to the relevant variablesproposed. Further, relying on more recenttheories and on literature on firm's boundariesand sectoral systems of innovation, we proposeindustry-specific variables forpharmaceuticals, including internal settings aswell as relations with external actors.Preliminary empirical support is given to ourhypotheses, concerning a panel of large USpharmaceutical companies. Copyright Kluwer Academic Publishers 2001