EH-NET BOOK REVIEW Published by (November 1996)

Louis Galambos with Jane Eliot Sewell, Networks of Innovation: Vaccine Development at Merck, Sharp & Dohme, and Mulford, 1895-1995. New York: Cambridge University Press, 1995. xii + 274 pp. Notes, bibliography, and index. $39.95 (cloth), ISBN 0-521-56308-9.

Reviewed for H-Business by James H. Madison, Professor of History, Indiana University, Bloomington

A New Company History

Networks of Innovation reminds the reader of the grand company histories written in the middle third of this century. Like authors of these earlier histories of textile and railroad companies, Louis Galambos and Jane Eliot Sewell explore closely the internal workings of a business organization, sometimes in the kind of detail that the general reader will wish to skip. But while Networks of Innovation looks internally at company history, it also seeks aggressively to move outward, to raise large questions of business evolution generally and of innovation particularly. In this wide reach it becomes a book about much more than three companies.

Galambos and Sewell examine three pharmaceutical companies. They tell briefly the story of H. K. Mulford Company, which in the 1890s developed a new serum for diphtheria, rose to success in the 1910s, declined in the 1920s, and then was purchased in 1929 by Sharp & Dohme. Sharp & Dohme struggled not only with the Depression but also missed opportunities in vaccine development in the 1940s and 1950s, to be merged with Merck in 1953. It is with Merck that the authors really begin their close look at a pharmaceutical company. They focus tightly on the process of innovation in new vaccines at Merck. Led by Maurice Hilleman, the company developed a highly successful vaccine for measles, mumps, and rubella. As the science on which this success was based gave way in the 1970s to new research in biochemistry, a new scientist, P. Roy Vagelos, took over leadership in 1975 and moved the firm to areas such as recombinant DNA research. Merck’s success over the last several decades was acknowledged in 1989 when Fortune‘s poll of business executives ranked the firm as the most respected corporation in the country.

The story Galambos and Sewell tell is not one of upward progress through the decades, however, and certainly not a success easily guaranteed. Rather, they argue for long cycles of change in which processes of innovation are central and for which the organization must have means of reading the new science and technology, of guiding the business to it, and of preparing for the next cycle. They emphasize the ways in which both Mulford and Sharp & Dohme failed in the first decades of the twentieth century to understand change. And they show the manner in which Merck succeeded in the last decades of the twentieth century.

A central feature in successful innovation, especially at Merck, the authors argue, was forceful leadership. And it is leadership, they claim, that needs more attention and that historians in recent decades have slighted: “The popularity of social history ‘from the bottom up,’ the interest in culture and diversity, the reaction against history as a study of the accomplishments of great white men, and the enthusiasm in some quarters for impersonal, behavioral explanations of organizational performance have all undercut scholarly analysis of the decisive role of leadership in modern institutions,” they assert (p. 76). Many historians would counter that our discipline is far more complex than this zero-sum game view suggests.

Galambos and Sewell do not write the history of these firms as the history only of a few great men, however. They pay close attention to broad contexts, particularly the mix of government, university-based research, and business that became increasingly central in many industries by the late twentieth century. This mix, they argue, has been “unusually creative” (p.x) but is now threatened by the health care reforms of the 1990s (a conclusion not all readers will share). In addition to looking outward, the authors examine the scientific and medical base for research and development at Merck, a subject to which Sewell, a historian of medicine, brings strength to complement Galambos’s expertise in business history. And they delineate most interestingly the processes of linkages by which Merck’s scientific and business leadership incorporated the changing scientific research base into the company’s innovation.

In their tight focus on innovation and on leadership, there are subjects Galambos and Sewell slight. They have not attempted a full-scale business history. There is little attention to distribution and marketing, for example, and almost none to employees and the corporate culture at the three companies studied. Their scope is selective rather than comprehensive.

In their access to archives, Galambos and Sewell had the advantages of many earlier company historians. Merck provided full access to its company archives. And the authors had the benefit of interviews with key Merck leaders. Indeed, the study began as a report prepared by the authors for internal company use, which they then revised for publication in book form. In this process the historians had scholarly freedom to arrive at their own interpretations. This access and freedom, of course, are important criteria for scholarship. Some readers will suspect, however, that the authors are so close to Merck and its leaders over the last two or three decades that they may have missed insights and perspectives that later scholarship will reveal. Some may even use the book to renew the old debate about robber barons and industrial statesmen.

Of course, contemporary history always becomes clearer with the passage of time, particularly in bringing to light innovations missed but not apparent until decades later. And to their great credit, Galambos and Sewell look not only internally but also externally as they push hard to see the larger meanings in the three firms they study. If they have some of the weaknesses of the old company histories they have also the strengths of recent scholarship in business history and the history of science. And rather than waiting until the textile and railroad industries were in decline, as their predecessors did, Galambos and Sewell have the courage to work in core areas of science-based industry evolving today and to bring that story to the present. Their attempt to grapple with the slippery subject of innovation in late-twentieth-century American business is itself an innovation.