Citation:
Krieger, Joshua Lev, Christopher Stanton, and James Barnett. "Forecasting ClimaCell." Harvard Business School Case 820-044, December 2019. View Details
Working Paper HBS Working Paper Series 2019 Trials and Terminations: Learning from Competitors' R&D Failures |
Abstract
I analyze project continuation decisions where firms may resolve uncertainty through news about competitors' research and development (R&D) 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. Leveraging the biopharmaceutical industry's unique characteristics to overcome barriers to measuring project-level responses, 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 from within the same market and same technology area—more than doubling their propensity to terminate drug development projects in the wake of this type of information. Finally, I explore how levels of competition, uncertainty, and opportunities to learn moderate the response to competitor failure news.
Keywords: Research and Development; Projects; Failure; Decision Making; Learning;
Citation:
Krieger, Joshua L. "Trials and Terminations: Learning from Competitors' R&D Failures." Harvard Business School Working Paper, No. 18-043, November 2017. (Revised November 2019.)