Seminar – Project Selection and Investment Carryovers in the Drug Development Process

Panos Markou, Cambridge Judge Business School

In developing new products, firms must balance entering into new domains (high uncertainty) with exploiting old domains (high competition). We leverage a unique database and rebuild the drug development pipelines of the Top 15 pharmaceutical companies between 1999-2016 in order to examine how firms select which projects to pursue and what impacts project success and failure. We find that firms select projects where they have prior experience, but that selection also depends on technological signals from rivals. Early-stage, uninformative technological signals increase the likelihood that the firm will diversify its search efforts to other domains, whereas late-stage, informative signals increase the likelihood of moving into the domain, but only if the rivals do not have a substantially large head-start. Moreover, conditional on selecting a project for further development, prior successful investments inform the firm as to what solutions work in a domain and increase the likelihood of future success. Prior failed investments inform as to what does not work and increase the likelihood of terminating future projects earlier.

Speaker bio

Panos Markou is a Research Assistant at the Entrepreneurship at Cambridge Judge Business School. He is a strong believer in research that is grounded in practice and has the potential for large impact and relevance. Currently, he is working with BMW to analyse their portfolio of purchasing contracts and optimise their procurement and financial hedging strategy. During his doctoral studies, he worked with BMW to develop and implement a tool to evaluate commodity price indices for index-linked purchase contracts. Prior to this, Panos collaborated with Banco Santander in organising and hosting the 6th Annual Supply Chain Finance Symposium, and with Delta Air Lines in the TechOps Division. His research interests include the interface of finance, operations, and risk management; supply chain finance; empirical operations management.