Trials and Terminations: Learning from Competitors’ R&D Failures
研究企业如何通过竞争对手的研发失败新闻来调整自身项目终止决策，发现技术学习效应超过竞争效应，且同市场同技术领域的失败新闻使企业终止项目的概率翻倍。
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 tradeoffs 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 use 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. This paper was accepted by Joshua Gans, business strategy.