Management control and strategy : a case study of pharmaceutical drug development

Abstract: How are formalmanagement controls designed and used in research & development(R&D)? The purpose of this study is to explain how such systemsare designed and used in formulating and implementing strategies ina pharmaceutical product development organisation. The study uses acontingency approach to investigate how the control system isadjusted to the business strategy of the firm. A case study wasconducted in AstraZeneca R&D where strategic planning,budgeting, project management, goals and objective systems and thereward systems were studied. Managers, external investors and researchers increasingly recognizethe strategic importance of R&D activities. This has inspiredresearchers and practitioners to develop formal systems and methodsfor controlling R&D activities. There is, however, previousresearch in which a resistance towards using formal control systemsto manage R&D was observed. This contrasts the generalperception of management control systems as important inimplementing and formulating strategies. The results of this study show that formal management control havean important role in managing R&D. It also explains how thesystem is adjusted to the business strategy of the studied firm.Different control systems (e.g. budget, project management) werefound to be designed and used in different ways. This implies thatit is not meaningful to discuss whether the entire control systemof a firm is tight or loose and/or used interactively ordiagnostically. Rather, the systems may demonstrate combinations ofthese characteristics. The control systems of the studied firm werefound to be used differently in the project and the functionaldimensions. The control systems were also designed and used indifferent ways at different organisational levels. Comprehensiveand rather detailed studies of control systems are called for inorder to understand how they are designed and used inorganisations. Such studies may explain some contradictory resultsin previous studies on how control systems are adjusted to businessstrategy.