New product development organization and performance: Theory and evidence from the pharmaceutical industry

This dissertation consists of three empirical chapters that collectively explore the firm-level factors that influence new product development performance in the pharmaceutical industry.; The first empirical chapter of the dissertation explores how performance in developing new drug products differs across pharmaceutical firms and the main firm-level capabilities that account for these differences. To assess performance, I analyze time-to-market data for more than one hundred new drug products. The results suggest that, after controlling for relevant drug and environmental factors, the time required to move products through the development cycle differs significantly across firms. To explain these differences, this chapter draws on the resource-based view of the firm and transaction cost economics, arguing that a firm's internal clinical capabilities, its ability to internalize critical external knowledge and the means by which a firm organizes development activities with key partners substantially influence performance. The econometric analysis supports several of the specific hypotheses.; The second chapter explores the extent to which the size and the scope of development activities afford firms cost advantages in performing development activities. The econometric results suggest that, in fact, larger firms do appear to reap performance benefits in pharmaceutical development. However, the magnitude of these benefits appears to be quite sensitive to the type of product under development as well as to the type of development activities being undertaken. Similarly, there appear to be performance advantages for firms with a more diverse portfolio of related development projects. These findings provide one potential explanation for why larger firms appear to conduct more R&D than smaller firms even though there appears to be no obvious relationship between firm size and the returns to R&D.; The third chapter explores the importance of development-related information technology (IT) on firm performance. Specifically, this chapter examines whether the use of computer modeling, data management, and networking applications influence drug development time. I also explore whether various information services positively affect development performance. The results suggest that IT investments are potentially beneficial, though there appears to be variation across product types and the phase of development. Information services do not appear to currently have obvious performance benefits in drug development.