The term “ipse dixit,” meaning “he said it” in Latin, symbolizes the authority principle and its profound influence on the evolution of knowledge throughout history. In the Middle Ages, it was closely tied to Aristotle’s supreme authority in philosophy, aligning with the religious and authoritarian beliefs of the time.
The dominion of “ipse dixit” persisted for millennia until the advent of the Scientific Revolution, epitomized by the groundbreaking work of Galileo Galilei. However, more than four centuries later, the question still remains valid: is scientific progress potentially influenced by institutional and political forces? Our research delves into this inquiry, exploring how external institutional environment might mold organizations’ innovation.
To understand whether institutional and political forces may influence the direction of corporate science, we need first to understand what that direction would have been, absent such forces. To this end, we selected two complementary perspectives. The first has to do with technology distinctiveness and profit maximization: it has been recently shown that technology differentiation has a strong positive correlation with firm performance, particularly in research and development-intensive industries. We thus verified if firms may deviate from this path because of political connections. Second, we considered a long-standing issue in technology literature, that is, when it is optimal to insist on a given technological path even after a failure, or rather, it is preferrable to give up. We developed a novel theoretical framework that enlightens such question, and then asked: Do politically connected firms insist too long on some given scientific paths?
To test empirically our ideas, we built a novel, unique dataset, merging data on organizations’ political behaviors, politician sponsorships, and lobbying by interest groups, with financial data of corporations, and detailed data of inventive and scientific activities on large sample of US public companies. We also expanded our dataset with highly granular information on research projects developed by companies, universities, and research institutes in pharmaceutical drug-development.
We started using this comprehensive database to explore the intricate relationship between a company’s technological distinctiveness and its engagement in political activities. Our primary objective was to verify whether there is a trade-off between firms’ efforts for technological distinctiveness, to enhance their market value, and their political endeavors. This question holds significant relevance for both businesses and society, as it can provide valuable insights into how political strategies affect a company’s innovation efforts, ultimately impacting its market value. Specifically, our empirical investigation examines the associations between technological differentiation, various political activities, and their impact on firm value. Notably, we found a strong positive correlation between technological differentiation and firm value, highlighting its importance in increasing a company’s market value. However, the relationship between different sources of political activities and firm value is less clearcut. Overall, we observe that the number of political connections (i.e., the political capital) holds greater importance than monetary investments in these connections.
We then explored whether technological distinctiveness and political activities are substitute strategies, as indicated by a negative correlation between technological differentiation and the number of candidates supported by PACs. Our findings confirm this relationship, even after accounting for various covariates: on average, firms invest either on technological differentiation or in political connections. Furthermore, we investigated the interaction between technological differentiation and different forms of political activities. We found a significant interaction between technological distinctiveness and lobbying, revealing that lobbying activities are positively associated with firm value when firms have technological distinctiveness. However, for less technologically differentiated firms, lobbying activities exhibit a negative association with their value. We then also developed a novel theoretical framework to understand the (so to say) ‘optimal’ decision to persist in the same research direction despite failures. There is a longstanding agreement in management literature that failures should be tolerated to achieve innovative breakthroughs. However, less is known about how companies should relocate their efforts after having encountered a failure in order to fix it. Building on cognitive research on scientific reasoning, we introduced a introduce a theory of persistent search during the discovery of a technological invention. This theory argues that organizations search for the latent value of a fully novel technology by generating alternatives (i.e., hypotheses on how the technology works) and experimenting with them. Biases characterize discovery search processes in both the hypotheses and the experiments. After a failure, solely persisting in searching for evidence is detrimental, but a coupled persistent search in the evidence space and the hypotheses space can improve the likelihood of reaching a successful result for the failed technology. The theory is tested by using the unique dataset of dynamic portfolios of research projects built on drug-development data.
It is important to note that our research is an ongoing endeavor, and we are leveraging the extensive nature of our dataset to gain a more granular understanding of the complex relationships between firms’ political activities and their innovation efforts. This extended analysis includes an exploration of the direction of pharmaceutical product development, a critical area of focus. The substantial efforts invested in building this extensive database over the years have opened up exciting research directions. This resource is proving invaluable in unraveling the intricate dynamics at play when it comes to firms’ politics and their commitment to innovation.
Overall project development
The project to date has been carried out by pursuing the following important aspects:
- Analysis of the existing literature on the role of politics in influencing corporate research and development choices.
- Collection, cleaning, integration of data from various sources.
- Empirical analyses.
Impact and outputs
The ongoing research project has yielded a diverse array of significant outputs:
- A comprehensive database on the intersection of politics and innovation within the manufacturing industry.
- An extensive database focused on drug development portfolios in the pharmaceutical sector.
- Innovative measures to assess technological differentiation and project novelty based on drug molecular similarity.
- A measure of persistence in research endeavors, which considers the temporal length of drug development efforts following setbacks.
- Empirical analysis into the intricate relationships between technological distinctiveness and political activities.
- Empirical analysis on the most effective resource allocation strategy to persist despite failures in the same research direction.
Our effort marks the first instance of amalgamating an extensive spectrum of data, ranging from the intricate details of lobbying activities, down to the very molecules comprising innovative pharmaceuticals. This dataset represents a powerful tool for exploring the critical mechanisms through which a company’s political positioning influences the nature of knowledge it cultivates. From this, we aim to uncover how political activities translate into the success or failure of innovations, the degree of willingness among companies to engage in high-risk research with potential societal impact, the likelihood of groundbreaking discoveries, and their inclination to pursue the development of life-saving drugs for rare diseases.
As part of our dissemination strategy, the research findings have been presented and will be presented at relevant academic conferences in the management field, including prestigious events like the Academy of Management Annual Conference and the Strategic Management Society. Furthermore, we intend to submit at least two academic papers to leading academic journals by the end of 2024. This multi-faceted approach ensures that the project’s impact and insights are widely shared and contribute to the ongoing discourse in the realm of management science, technology, and innovation.