Trials and terminations
Subtitle: learning from competitors' R&D failures
By: Joshua L. Krieger, Harvard Business School
Series: Working paper / Harvard Business School -- 18-043; Working paper (Harvard Business School) -- 18-043
Publisher: Harvard Business School
Published: 2017
Place of publication: Boston
Language: eng
Number of pages: 56
Description: I analyze project continuation decisions where firms may resolve uncertainty through news about competitors' failures as well as through their own results. I examine the trade-offs and interactions between product-market competition and technological learning from parallel R&D projects in the setting of drug development. Leveraging the biopharmaceutical industry's unique characteristics to overcome barriers to measuring the project-level response to competitor news, I employ a difference-in-differences strategy to evaluate how competitor exit news alters a firm's own project discontinuation decisions. The findings reveal that technological learning dominates competition effects. Firms are most sensitive to competitor failure news coming from within the same market and technology area--more than doubling their propensity to terminate projects in the wake of this type of information. I also find evidence that firms overreact to failure news from closely related competitor projects. Finally, I investigate project- and firm-level characteristics that drive persistent differences in decision-making performance.
Notes: "November 2017." -- Publisher's website.

Includes bibliographical references (pages 37-42).