Firm Effects vs. Location Effects in the Organization of Pharmaceutical Research

This paper evaluates the extent to which firm effects and location effects impact the adoption of organizational practice in pharmaceutical research laboratories. Examining simultaneously the relative salience of firm versus location effects enables the paper to assess quantitatively how multiple environments shape organizational characteristics. Using a novel dataset, the results suggest that both firm-specific and location-specific effects have a significant and quantitatively important impact on the extent to which laboratories engage in science-driven drug discovery, a practice associated with enhanced research productivity in the 1980s and 1990s. The magnitude of firm effects exceeds that of location effects in the worldwide sample, although this finding is reversed for laboratories in the United States. Overall, the results imply that both firm-specific and locationspecific characteristics drive organizational practice in pharmaceutical research laboratories and that the relative strength of each depends on context. More generally, the paper demonstrates that while organizations may be broadly homogeneous within environments, organizational heterogeneity may result if organizations are subject to multiple environments.