Investor Reactions to New Product Development Failure in the Biotechnology Industry
This dissertation investigates important and cutting-edge issues surrounding new product development failure and its consequences for market values of innovation-driven firms. Although a substantial body of literature demonstrates that new product development failure harms some companies more than others, this dissertation examines which factors, specific to a firm, impact this variance in investor reactions to new product development failure. Moreover, this dissertation investigates how innovative firms can foster or mitigate financial consequences when they have to announce that promising new product development projects have failed to achieve desired milestones. Using a unique dataset of publicity traded US biotechnology companies experiencing new product development failures during the period of 1994-2008, four different event studies provide insights to management scholars, firm managers, and biotech investors. The results of these studies show that investor reactions to new product development failure are more complex than many previous studies have assumed, and that firm resources and capabilities at different organizational levels interactively impact these reactions. This dissertation concludes with implications for practise and suggestions for new avenues for future research on new product development failure and their financial consequences for innovative firms.