The Impact of Personal Genomics on Risk Perceptions and Medical Decision-Making

Joshua Lev Krieger; Fiona   Murray; J. Scott  Roberts; Robert C. Green

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Article | Nature Biotechnology

The Impact of Personal Genomics on Risk Perceptions and Medical Decision-Making

by Joshua Lev Krieger, Fiona Murray, J. Scott Roberts and Robert C. Green

Keywords: economics; policy; medicine; psychology; Economics; Policy;

Format: Print

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Citation:

Krieger, Joshua Lev, Fiona Murray, J. Scott Roberts, and Robert C. Green. "The Impact of Personal Genomics on Risk Perceptions and Medical Decision-Making." Nature Biotechnology 34, no. 9 (September 2016): 912–918.

About the Author

Joshua Lev Krieger

Assistant Professor of Business Administration

Entrepreneurial Management

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Working Paper | HBS Working Paper Series | 2018

Find and Replace: R&D Investment Following the Erosion of Existing Products

Joshua Krieger, Xuelin Li and Richard T. Thakor

How do R&D-intensive firms react to negative shocks to their existing products? We explore this question using detailed project-level data from drug development firms. Using FDA Public Health Advisories as an exogenous and idiosyncratic negative shock to approved drugs, we examine how firms and their competitors react in terms of their R&D investment and financing decisions. We document that these negative shocks lead affected firms to increase R&D expenditures, which they finance with debt. In terms of investment behavior, these shocks increase the likelihood of affected firms acquiring drug projects from other firms, rather than developing new projects internally. Examining the channels behind this increase in R&D in-licensing, we explore heterogeneity in treatment effects and competitor spillovers. We find that competitors move resources away from affected therapeutic areas and into more exploratory projects, after indirectly experiencing these shocks. Rather than turning to external acquisitions, these competing firms appear to reshuffle their own drug portfolios—moving resources away from the affected therapeutic area and into more exploratory projects.

Keywords: R＆D Investments; drug development; product shocks; System Shocks; Research and Development; Investment; Behavior; Pharmaceutical Industry;

Citation:
Krieger, Joshua, Xuelin Li, and Richard T. Thakor. "Find and Replace: R&D Investment Following the Erosion of Existing Products." Harvard Business School Working Paper, No. 19-058, December 2018. View Details

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Working Paper | HBS Working Paper Series | 2017

Developing Novel Drugs

Joshua Krieger, Danielle Li and Dimitris Papanikolaou

We analyze firms' decisions to invest in incremental and radical innovation, focusing specifically on pharmaceutical research. We develop a new measure of drug novelty that is based on the chemical similarity between new drug candidates and existing drugs. We show that drug candidates that we identify as ex-ante novel are riskier investments, in the sense that they are subsequently less likely to be approved by the FDA. However, conditional on approval, novel candidates are, on average, more valuable―they are more clinically effective; have higher patent citations; lead to more revenue and to higher stock market value. Using variation in the expansion of Medicare prescription drug coverage, we show that firms respond to a plausibly exogenous cash flow shock by developing more molecularly novel drug compounds, as opposed to more so-called "me-too" drugs. This pattern suggests that, on the margin, firms perceive novel drugs to be more valuable ex-ante investments, but that financial frictions may hinder their willingness to invest in these riskier candidates.

Keywords: Research and Development; Investment; Decision Choices and Conditions; Pharmaceutical Industry;

Citation:
Krieger, Joshua, Danielle Li, and Dimitris Papanikolaou. "Developing Novel Drugs." Harvard Business School Working Paper, No. 18-056, January 2018. View Details

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Working Paper | HBS Working Paper Series | 2017

Trials and Terminations: Learning from Competitors' R&D Failures

Joshua Lev Krieger

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.

Keywords: Research and Development; Projects; Failure; Decision Making; Learning;

Citation:
Krieger, Joshua Lev. "Trials and Terminations: Learning from Competitors' R&D Failures." Harvard Business School Working Paper, No. 18-043, November 2017. View Details

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The Impact of Personal Genomics on Risk Perceptions and Medical Decision-Making

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