Hu, Yansong and McNamara, Peter and Piaskowska, Dorota (2017) Project Suspensions and Failures in New Product Development: Returns for Entrepreneurial Firms in Co‐Development Alliances. Journal of Product Innovation Management, 34 (1). pp. 35-59. ISSN 0737-6782

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Abstract

Entrepreneurial biotech and large pharmaceutical firms often form alliances to co-develop new products. Yet, newproduct development (NPD) is fraught with challenges that often result in project suspensions and failures. Con-sidering this, how can firms increase the chances that their co-development alliances will create value? To answerthis question, the authors build on insights from signaling theory to argue that prior project suspensions providepositive signals leading to an increase in value creation, while project failures have the opposite effect. In addi-tion, drawing on insights from temporal construal theory, this research predicts that the strength of these effectsis contingent on the stage along the exploration–exploitation continuum at which the alliance is formed. Theauthors undertook event study analyses of 248 alliances formed by 104 biotechnology firms from the United Statesand Europe listed on eight stock exchanges over an 8-year period between 1996 and 2003. The results confirmthat prior NPD project suspensions have a stronger value creation effect (or prior failures have a weaker valuedestruction effect) in the case of exploration alliances in the upstream of NPD processes than in the case ofmoderate-scale exploitation alliances in the downstream of NPD. This study is among the first to examine howboth prior NPD project suspensions and failures of firms affect the abnormal returns achieved from co-development alliances. This research therefore contributes to the innovation literature by honing a better under-standing of setbacks and failures in NPD. Moreover, the findings contribute to the literature on strategic alliancesby identifying new conditions under which firms can create or preserve value. This research also contributes tosignaling theory by providing evidence of the moderation effect caused by the signaling environment. Finally, thisstudy contributes to the entrepreneurial literature on value creation for entrepreneurial firms in alliances follow-ing adverse events.

Item Type:	Article
Keywords:	Project Suspensions; Failure; New Product Development; Returns for Entrepreneurial Firms; Co-Development Alliances;
Academic Unit:	Faculty of Social Sciences > School of Business
Item ID:	19214
Identification Number:	https://doi.org/10.1111/jpim.12322
Depositing User:	Peter McNamara
Date Deposited:	21 Nov 2024 15:38
Journal or Publication Title:	Journal of Product Innovation Management
Publisher:	Wiley & Sons
Refereed:	Yes
URI:	Publisher
Use Licence:	This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here

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