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• Case | HBS Case Collection | December 2019

  Forecasting ClimaCell

  Joshua Lev Krieger, Christopher Stanton and James Barnett

  A weather technology startup, ClimaCell considers the R&D trade-offs and financing implications of pursuing a proposed contract with a major automobile maker, rather than continuing its focus on building a scalable, all-purpose weather prediction engine.

  Keywords: Weather; Forecasting and Prediction; Technological Innovation; Research and Development; Finance; Cost vs Benefits; Decision Making; Strategy;

  Citation:

  Krieger, Joshua Lev, Christopher Stanton, and James Barnett. "Forecasting ClimaCell." Harvard Business School Case 820-044, December 2019.  View Details

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• Working Paper | HBS Working Paper Series | 2020

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

  Joshua Krieger, Xuelin Li and Richard T. Thakor

  How do innovative firms react when existing products experience negative shocks? We explore this question with detailed project-level data from drug development firms. Using FDA Public Health Advisories as idiosyncratic negative shocks to approved drugs, we first examine how drug makers react through investment decisions. Following these shocks, affected firms increase R&D expenditures, driven by a higher likelihood of acquiring external innovations, rather than developing novel projects internally. Such acquisition activities are concentrated in firms with weak research pipelines. We also find that competing developers move resources away from the affected therapeutic area and into exploratory projects. Our results have important implications about how firms’ commercialization capital investments affect their subsequent R&D decisions.

  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. (Revised May 2020.)  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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