New research from York University’s Schulich School of Business shows that companies with a greater amount of both success and failure experiences tend to discontinue less promising new product development (NPD) projects sooner than firms with less success and failure experiences.
The findings are contained in the paper “Inseparable two: Impact of prior success and failure on NPD project discontinuation” which has been accepted for publication in the Journal of Operations Management. The paper is co-authored by Moren Lévesque, professor of operations management and information systems at Schulich and the CPA Ontario Chair in International Entrepreneurship, together with Annapoornima M. Subramanian (National University of Singapore’s Faculty of Engineering) and Vareska Van De Vrande (Rotterdam School of Management).
Their study analyzed new drug development projects at 2,938 biopharma firms worldwide. The researchers looked at how characteristics of a firm’s prior success and failure experiences, such as the number of launched and discontinued past projects, their attributes (e.g., patent counts) and their similarity to current projects influence the risks of continuing or discontinuing NPD projects, thus impacting future discontinuation decisions.
“New product development is a risky and expensive endeavour,” said Lévesque. “Many companies face challenges when deciding whether and when to discontinue new product development projects.
“What was striking is that biopharmas with more patent counts tended to discontinue unpromising projects sooner but only if the larger number of patents came from successful experiences, but when considering failure experiences, sooner discontinuations tended to happen when the focal drug was closely related to these failure experiences in terms of, for instance, the technologies underlying that focal drug.”
The research findings have practical implications.
“With new innovations and business models continually arising, managing a firm's resources in the most effective and efficient way is paramount," said Lévesque. "Shortening the time from initiation to discontinuation of NPD projects that are less promising is an effective way to reduce R&D (research and development) expenditures and increase efficiency.”