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Managerial Cognition and Innovation Management in the Pharmaceutical Industry: The Success of Genentech

The purpose of this paper is to add further knowledge to the research on organizational evolution, concerning managerial cognition and organizational innovation activities. In our view, managerial cognitions are an essential link between organizational activities and developments in the business environment. Managerial cognitions, in combination with an organization’s alignment with industry recipes, fundamentally influence on how an organization is able to balance between explorative and exploitative innovation activities. Pursuing this balance is essential for organizations in order for them to adapt to changes in their business environment and thus survive and succeed in the longrun. We construct a historical case study on Genentech, one of the first and largest biotechnology companies in the world, to depict how explorative and exploitative innovation activities evolve alongside senior management cognitions. Our descriptive approach presents a nuanced view of the dynamic, context-specific and sometimes conflicting issues behind the coevolution of organizations and the business environment. We expand on the key factors behind Genentech’s extraordinary performance in bringing new health care solutions to market. Finally, we offer five propositions on how managerial cognitions might generally direct organizational innovation activities.