Arbiter of science: Institutionalization and status effects in fda drug review 1990-2004

Research output: Contribution to conferencePaperpeer-review

Abstract

States exert significant influence on firm outcomes and strategies through the regulation of new products. While prior research has focused on state regulation's effect on firm behavior, this paper focuses on organizational factors that influence the regulatory decision-making process. Using the approval of new drugs by the Food and Drug Administration (FDA) as my context, I argue that the FDA's historical evolution as an arbiter of science infused the agency with values that focus the agency's attention on specific types of signals. In particular, I contend that firm status in the knowledge domain becomes salient as the FDA attempts to resolve the uncertainty in determining drug quality. Furthermore, I propose that innovation strategies and external shocks generating uncertainty enact the FDA's scientific identity to a greater degree, rendering a firm's status in the knowledge domain even more valuable. Using the review times for 1,303 New Drug Applications (NDAs) approved by the FDA between 1990 and 2004, I find that firms with higher knowledge status receive faster approval of their drugs, with roughly a one and a half month advantage for a top 13% firm over an average firm. The benefits of being a high status actor were further enhanced when firms attempted to do radical innovation, but status had limited effects when the regulator suffered from a legitimacy crisis. Additionally, status signals of product specific competencies were less influential in expediting drug review than a firm's overall position in more broader and basic areas of knowledge. The paper concludes with a discussion of the contributions to organizational theory and the practical implications for innovative strategies of pharmaceutical and biotechnology firms.

Original languageEnglish (US)
DOIs
StatePublished - 2007
Externally publishedYes
Event67th Annual Meeting of the Academy of Management, AOM 2007 - Philadelphia, PA, United States
Duration: Aug 3 2007Aug 8 2007

Other

Other67th Annual Meeting of the Academy of Management, AOM 2007
Country/TerritoryUnited States
CityPhiladelphia, PA
Period8/3/078/8/07

All Science Journal Classification (ASJC) codes

  • Management Information Systems
  • Management of Technology and Innovation

Keywords

  • Institutions
  • Regulation
  • Status

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