Publications
Publications
- 2022
- HBS Working Paper Series
Are Transformational Ideas Harder to Fund? Resource Allocation to R&D Projects at a Global Pharmaceutical Firm
By: Joshua Krieger and Ramana Nanda
Abstract
We study resource allocation to early-stage ideas at an internal startup program of one the largest pharmaceutical firms in the world. Our research design enables us to elicit every evaluator's scores across five different attributes, before seeing how would allocate capital to the same ideas. We find that in resource allocation decisions, evaluators systematically penalized projects that they scored high on some attributes but low in others, compared to ones that they scored more equally on all dimensions. A consequence of this penalty was that ideas perceived as being high risk and high reward tended to lose out to projects considered relatively less transformational, but safer bets. Our results shed light on a potential mechanism for why novel ideas are handicapped in R&D funding: they may be systematically losing out in head-to-head resource allocation to ideas that are more balanced in their attributes even when the latter have less transformational potential.
Keywords
Project Selection; Pharmaceuticals; Financing Innovation; Resource Allocation; Innovation and Invention; Research and Development
Citation
Krieger, Joshua, and Ramana Nanda. "Are Transformational Ideas Harder to Fund? Resource Allocation to R&D Projects at a Global Pharmaceutical Firm." Harvard Business School Working Paper, No. 23-014, August 2022.