Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • September 2022
  • Article
  • Management Science

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

By: Joshua L. Krieger, Xuelin Li and Richard T. Thakor
  • Format:Print
  • | Pages:21
ShareBar

Abstract

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; M&A; Biopharmaceutical Industry; FDA; System Shocks; Research and Development; Investment; Decision Making; Pharmaceutical Industry

Citation

Krieger, Joshua L., Xuelin Li, and Richard T. Thakor. "Find and Replace: R&D Investment Following the Erosion of Existing Products." Management Science 68, no. 9 (September 2022): 6552–6571.
  • SSRN
  • Find it at Harvard
  • Read Now

About The Author

Joshua Lev Krieger

Entrepreneurial Management
→More Publications

More from the Authors

    • 2022
    • Faculty Research

    Are Transformational Ideas Harder to Fund? Resource Allocation to R&D Projects at a Global Pharmaceutical Firm

    By: Joshua Krieger and Ramana Nanda
    • August 2022
    • Faculty Research

    AppHarvest: Rebuilding the Appalachian Economy Through Agriculture

    By: Joshua Lev Krieger, William R. Kerr and Bailey McAfee
    • August 2022
    • Faculty Research

    In-Q-Tel: Innovation On A Mission

    By: Josh Lerner and Joshua Lev Krieger
More from the Authors
  • Are Transformational Ideas Harder to Fund? Resource Allocation to R&D Projects at a Global Pharmaceutical Firm By: Joshua Krieger and Ramana Nanda
  • AppHarvest: Rebuilding the Appalachian Economy Through Agriculture By: Joshua Lev Krieger, William R. Kerr and Bailey McAfee
  • In-Q-Tel: Innovation On A Mission By: Josh Lerner and Joshua Lev Krieger
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Accessibility
  • Digital Accessibility
Copyright © President & Fellows of Harvard College