The Emergence and Change of Pharmacia Biotech 1959-1995 L'~~~ STOCKHOLM SCHOOL ('Sra5~ OF ECONOMICS ~.~*,,-." THE ECONOMIC RESEARCH INSTITUTE ~~~4t Address: Sveavagen 65, Box 6501, S-113 83 Stockholm. Tel.+46 8-736 90 00 Basic Orientation The Economic Reserarch Institute, at the Stockholm School of Economics (EFI) is devoted to the scientific study of problems in management science and economics. It provides research facilities for scholars belonging to these disciplines, training advanced students in scientific research. The studies to be carried out by the Institute are chosen on the basis of their expected scientific value and their relevance to the research programs outlined by the different sections of the Institute. Research Divisions A Management and Organization B Accounting and Managerial Finance C Managerial Economics CEE Center for Ethics and Economics CFR Center for Risk Research CHE Center for Health Economics D Marketing, Distribution, and Industry Dynamics ES Economic Statistics FI Finance F Public Management lEG International Economics and Geography I Information Management p Economic Psychology S Economics T Industrial Production Research Programs: Man and Organization The Foundation for Distribution Research Policy Sciences Additional information about research in progress and published reports is described in our project catalogue. The catalogue can be ordered directly from the Economic Research Institute, Box 6501, S-113 83 Stockholm, Sweden. The Emergence and Change of Pharmacia Biotech 1959-1995 The Power of the Slow Flow and the Drama of Great Events Per Andersson .... • STOCKHOLM SCHOOL \-';1 OF ECONOMICS 'f.' TIlE ECONOMIC RESEARCH INSTITIJrE A Dissertation for the Doctor's Degree in Philosophy Stockholm School of Economics 1996 © EFI and the author 1996 ISBN 91-7258-410-6 Key Words: Pharmacia Biotech: Business History Marketing Organization Company Transformation Biotechnology Industry Printed by Graphic Systems in Stockholm 1996 Distributed by: The Economic Research Institute at the Stockholm School of Economics, Box 65.01, S-113 83 Stockholm, Sweden Foreword This book is very much the result of a collective process, like all studies that claim to be part of social science. In one way, it could be said to be the outcome of research carried out within Pharmacia Biotech AB from 1991 to 1994 but in a wider sense, the process started long before that and has continued long after the draft manuscript was finished. Just as the story of Pharmacia Biotech AB is based on a network view of reality, so has the procedure of writing the story been a network process. During different phases of the process, the contacts and relations with people within Pharmacia, in the research community, and elsewhere, have constituted the research context. Some of these people have provided the all important stability and continuity throughout the whole process. The importance of this continuity and stable support can never be overstated. And it is specially important during those moments - which recur so often - when the whole process seems to be drifting in every possible direction. These stable contacts have contributed and shared in the evolution of the ideas, descriptions and contents, and their enthusiasm, knowledge and insight has proved a constant source of energy and inspiration, and also of fruitful tensions. The stable contacts have also been important in that they have indirectly linked me to important new contacts, within Pharmacia and in networks of academic researchers. Although my role throughout the process has first and foremost been that of researcher, the different roles one has in the different contexts are not always easy to separate. In a study of the long-term development of the British company leI one of the many important inspirations for this book, Andrew Pettigrew, describes his dilemma: 1 The mixed role that I have played in the company as a researcher, consultant, and trainer may also have helped me to gain access to people and appreciate situations and dilemmas in a wider fashion than if I had defined my role just as researcher, or a consultant, or a trainer. Effective, or merely adequate, research on any sphere of life has surely to be a mutual process where the need to balance involvement and distance is a critical part of the process. 1Pettigrew, A., The Awakening Giant - Continuity and Change in ICI, Oxford: Basil Blackwell, 1985, p.XIV vi Contents My role in Pharmacia Biotech has first and foremost been that of researcher. On some occasions, for example when attending and participating in internal seminars and conferences, I have extended this role by providing ideas and suggestions based on my general experiences from prior research studies. Thus research of this kind, for obvious reasons, has to be a mutual process. The opensidedness of the company's character has been invaluable in gaining access to the organization and its complex and sometimes problematic processes of organizational change. The study had not been possible to make without it. Like any long-term business relationship, my involvement in the organization has been based, I dare say, on mutual trust and confidence. However, all network processes, including those social processes connected to doing long-term, organizational case studies, are not always so easy to predict. In this study of Pharmacia Biotech, important people who have been stable contacts for me and for the study, have left the organization for other jobs during the course of the process ­ sometimes before introducing me to successors or to other important persons in the company who could assist. Thus, the case study process has comprised many of the elements and characteristics of longitudinal organizational change processes: unforeseen problems and solutions appearing unexpectedly, progress and retrogression evolving side by side, tensions and lost opportunities, inertia, and rare moments when nothing seems able to hinder or stop the advancing work process. Recognizing the unequivocal fact that these would be the enabling and constraining circumstances of a study of this kind, I realized that stable contacts and relations were necessary both for the study, as such, as well as for giving me the introduction to people who were able to help me complete the story of Pharmacia Biotech. I gained access to Pharmacia Biotech through Seppo Nilsen, who was my first link into the organization and who was a great help in enabling me to start and to continue the study. He introduced me to Arne Forsell whose support has been invaluable. Without Arne's support the study would not have been possible. Arne also read the manuscript in the later stages and provided detailed comments on the whole story. Others have read portions of it and have helped me refine certain parts of the story. The most important among these were Per Idberg, Christer Ullin, Jan Ehrneberg and Lars-Erik Utterman. Kjell Hedlof was very helpful for the archival work and Marie Almquist has been important in providing me with names and contacts. Special thanks are due to my team of advisers. Professor Lars-Gunnar Mattsson at the Stockholm School ofEconomics has given me support, confidence and inspiration before and throughout the study. Claes-Robert Julander at the Stockholm School of Economics Contents vii and Professor Lars-Erik Gadde at Chalmers University of Technology in Gothenburg have also given me valuable support and advice, especially during the final stages when everything is put together into one whole. I am also greatly indebted to my research colleagues at the Department of Marketing, Distribution and Industry Dynamics at the Stockholm School ofEconomics. Their comments and critiques have been very important in the process of completing the story of Pharmacia Biotech. A special thanks also to Alexandra Waluszewski at Uppsala University for her valuable comments on the case study during the later phases. Thanks also go to Ann-Charlotte Edgren at the Stockholm School of Economics for her help on practical matters and to Rune Castenas for his help in organizing economic and administrative matters. George Cook and Patrick Sweet have played a very important role in correcting my English and also in giving me advice on the narrative form and structure of the text. I am also greatly indebted for the support and indispensable research funding which has been provided throughout the study by Torsten and Ragnar Soderbergs Stiftelser. The economic support from this Foundation has enabled me to continue and to complement this study. Important initial support and funding was provided by Mekanforbundet through the Marketing Technology Center in Stockholm. During this process research funding has also been provided by the International Motor Vehicle Program (Massachusetts Institute ofTechnology) and by Saab-Scania AB. This case study is the empirical part of a study of industrial marketing change processes. It complements a separate analysis volume entitled "Concurrence, Transition and Evolution - Perspectives of Industrial Marketing Change Processes". Stockholm in December, 1995 Per Andersson Contents Foreword PROLOGUE A Strategic Reorganization and Reorientation 1989 2 Three Major Periods of Development 5 Structure ofCase Narrative 9 THE MOVING INDUSTRIAL CONTEXT 12 Technological and Network Changes in the Pharmaceutical-Biotech Industry 12 Network The State of Biotechnology around 1989 15 A Changing Industrial Network 21 Emerging Technological Changes in the Biotech Supply Sector 24 Technological Shifts