Hu, Yansong, McNamara, P. and Piaskowska-Lewandowska, D. (2017) Project suspensions and failures in new product development : returns for entrepreneurial firms in codevelopment alliances. Journal of Product Innovation Management, 34 (1). pp. 35-59. doi:10.1111/jpim.12322 ISSN 0737-6782.

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Abstract

Entrepreneurial biotech and large pharmaceutical firms often form alliances to co2develop new products. Yet new product development (NPD) is fraught with challenges that often result in project suspensions and failures. Considering this, how can firms increase the chances that their co2development alliances will create value? To answer this question, the authors build on insights from signaling theory to argue that prior project suspensions provide positive signals leading to an increase in value creation, while project failures have the opposite effect. In addition, drawing on insights from temporal construal theory, this research predicts that the strength of these effects is contingent on the stage along the exploration2exploitation continuum at which the alliance is formed. The authors undertook event study analyses of 248 alliances formed by 104 biotechnology firms from the US and Europe listed on eight stock exchanges over an eight2year period between 1996 and 2003. The results confirm that prior NPD project suspensions have a stronger value creation effect (or a weaker value destruction effect) in the case of exploration alliances in the upstream of NPD processes than in the case of moderate2scale exploitation alliances in the downstream of NPD. This study is among the first to examine how both prior NPD project suspensions and failures of firms affect the abnormal returns achieved from co2 development alliances. This research therefore contributes to the innovation literature by honing a better understanding of setbacks and failures in NPD. Moreover, the findings contribute to the literature on strategic alliances by identifying new conditions under which firms can create or preserve value. Third, this research contributes to signaling theory by providing evidence of the moderation effect caused by the signaling environment. Finally, this study contributes to the entrepreneurial literature on value creation for entrepreneurial firms in alliances following adverse events.

Item Type:	Journal Article
Subjects:	H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Divisions:	Faculty of Social Sciences > Warwick Business School > Marketing Group Faculty of Social Sciences > Warwick Business School
Library of Congress Subject Headings (LCSH):	New products , Strategic alliances (Business) , Pharmaceutical industry, Biotechnology industries, Signals and signaling
Journal or Publication Title:	Journal of Product Innovation Management
Publisher:	John Wiley & Sons Ltd.
ISSN:	0737-6782
Official Date:	January 2017
Dates:	Date Event January 2017 Published 18 May 2016 Available 12 April 2016 Accepted
Volume:	34
Number:	1
Page Range:	pp. 35-59
DOI:	10.1111/jpim.12322
Status:	Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Restricted or Subscription Access
Date of first compliant deposit:	16 May 2016
Date of first compliant Open Access:	18 May 2018

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