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

Abstract: How are formal management controls designed and used in research & development (R&D)? The purpose of this study is to explain how such systems are designed and used in formulating and implementing strategies in a pharmaceutical product development organisation. The study uses a contingency approach to investigate how the control system is adjusted to the business strategy of the firm. A case study was conducted in AstraZeneca R&D where strategic planning, budgeting, project management, goals and objective systems and the reward systems were studied.Managers, external investors and researchers increasingly recognize the strategic importance of R&D activities. This has inspired researchers and practitioners to develop formal systems and methods for controlling R&D activities. There is, however, previous research in which a resistance towards using formal control systems to manage R&D was observed. This contrasts the general perception of management control systems as important in implementing and formulating strategies.The results of this study show that formal management control have an important role in managing R&D. It also explains how the system is adjusted to the business strategy of the studied firm. Different control systems (e.g. budget, project management) were found to be designed and used in different ways. This implies that it is not meaningful to discuss whether the entire control system of a firm is tight or loose and/or used interactively or diagnostically. Rather, the systems may demonstrate combinations of these characteristics. The control systems of the studied firm were found to be used differently in the project and the functional dimensions. The control systems were also designed and used in different ways at different organisational levels. Comprehensive and rather detailed studies of control systems are called for in order to understand how they are designed and used in organisations. Such studies may explain some contradictory results in previous studies on how control systems are adjusted to business strategy.