Nasty, Brutish, and Short: Embeddedness Failure in the Pharmaceutical Industry

Since the early 1990s, U.S. pharmaceutical firms havepartially outsourced the coordination of the clinical trialsthey sponsor to specialized firms called contract researchorganizations. Although these exchanges appeared ripefor the development of close, “embedded” ties, they werein fact “nasty, brutish, and short”—i.e., marked by ill-willand a bias toward replacing current exchange partnersdue to perceptions of underperformance. Drawing onin-depth field work, we use causal loop diagrams tocapture this puzzle and to help explain it. Our analysissuggests that attempts to build embedded relations willfail if the parties do not recognize the limitations of thecommitments they can credibly make. More generally,when managers misdiagnose as failure what is in fact atrade-off inherent in the design of their organizations, theyrisk engendering even worse outcomes than those theywould otherwise attain.