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Managing Risk in Pharmaceutical R&D

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Abstract:

OVERVIEW: Risk is a powerful force in innovative organizations for the obvious reason that it means the future outcomes of decisions are uncertain and, less obviously, because it can foster decision biases like loss aversion and over-optimism. Decision biases at one level are often counterbalanced by different biases at other levels of a firm. Two archetypal approaches to managing risk in R&D—so-called “buckshot” vs. “birdshot” risk strategies— hold implications for organizational performance in the face of risk. Historical data from two leading pharmaceutical firms permit exploring these two patterns of strategic decision-making to see how these risk strategies have played out over the ensuing years.

Keywords: COGNITIVE BIASES; PHARMACEUTICAL R&D; RISK-TAKING; STRATEGY

Document Type: Research Article

Publication date: March 1, 2010

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