MANAGING INNOVATION IN THE INFORMATION AGE

The continued vitality of the most successful U.S. and European pharmaceutical companies in the face of accelerating scientific and technological change holds valuable lessons for managers in all industries trying to respond to turbulent times. The pharmaceutical industry faces some serious challenges in the future, most notably, the proposed reform of the U.S. health care system. Yet its success in the crucial area of research can serve as a benchmark for companies seeking to become more innovative in the overloaded environment of the information age. New competitors skillfully exploiting a wave of technological change have displaced or seriously challenged the companies that once dominated industries such as machine tools, steel, xerography, automobiles, semiconductors, and computers. In contrast, companies founded in the 1940s and 1950s continue to dominate the pharmaceutical industry. These companies have demonstrated an ability to learn and grow that confounds conventional wisdom. Despite their age, size, and success, they have found ways to retain the flexibility and responsiveness of companies one-tenth their size and age. And they have already solved some of the competitive challenges in the research arena that companies in other industries are just starting to grapple with. New research conducted by Rebecca Henderson of MIT and lain Cockburn of the University of British Columbia suggests that the longevity of pharmaceutical companies attests to a unique managerial competency: an ability to foster a high level of specialized knowledge within an organization, while preventing that information from fixing the company in the past, unable to respond to an ever-changing environment.