Entrepreneurial Management Unit (HBS)
Rock 213
Arthur Rock Center for Entrepreneurship
Boston, MA 02163
Current Research and Working Papers:
“Trials and Terminations: Learning from Competitors' R&D Failures” [Job Market Paper]
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I develop a theoretically motivated approach to analyzing project continuation decisions, where firms may resolve uncertainty through news about competitors' failures, as well as through their own results. I examine the trade-offs between product-market competition and potential learning from parallel R&D projects in the setting of drug development. Leveraging the industry's unique characteristics to overcome barriers to measuring the project-level response to competitor news, I employ a difference-in-differences strategy to evaluate how competitor exit news alters a firm's own project discontinuation decisions. The findings reveal that technological learning dominates competition effects. Firms are most sensitive to competitor failure news coming from within the same market and technology area--more than doubling their propensity to terminate projects in the wake of this type of information. Second, I find evidence that firms overreact to failure news from closely related competitor projects. Finally, I grade decisions and investigate project- and firm-level characteristics that drive persistent differences in decision-making performance.
“Financing Novel Drugs” (with Danielle Li and Dimitris Papanikolaou) Working Paper
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We analyze firms' decisions to invest in incremental and radical innovation, focusing specifically on pharmaceutical research. We first develop a new measure of drug novelty that is based on the chemical similarity of new drug candidates to existing drugs. We show that drug candidates that we identify as ex-ante novel are riskier investments, in the sense that they are subsequently less likely to be approved by the FDA. However, conditional on approval, novel candidates are more likely to be both socially as well as privately valuable. Second, we shed light on the role of financial constraints in firms' decisions to invest in novel drug compounds. We use variation in the expansion of Medicare prescription drug coverage in the United States, which differentially benefited firms based on their drug portfolio, to isolate exogenous variation in firm cash flows. We find that firms that benefit more from the expansion of drug coverage develop more new drug candidates as a result. This increase is primarily driven by the development of more molecularly novel drug compounds.
“Judging the Impact of R&D Failure: Evidence from Stock Market Spillovers” (with Lindsey Raymond and Cirrus Foroughi)
Publications:
“The Career Effects of Stigma: Evidence from Scientific Retractions” (with Pierre Azoulay, and Alessandro Bonatti). Forthcoming, Research Policy. NBER Working Paper #21146
Scandals permeate social and economic life, but their consequences have received scant attention in the economics literature. To shed empirical light on this phenomenon, we investigate how the scientific community's perception of a scientist's prior work changes when one of his articles is retracted. Relative to non-retracted control authors, faculty members who experience a retraction see the citation rate to their articles drop by 10% on average, consistent with the Bayesian intuition that the market inferred their work was mediocre all along. We then investigate whether the eminence of the retracted author, and the publicity surrounding the retraction, shape the magnitude of the penalty. We find that eminent scientists are more harshly penalized than their less-distinguished peers in the wake of a retraction, but only in cases involving fraud or misconduct. When the retraction event had it source in "honest mistakes," we find no evidence of differential stigma between high- and low-status faculty members.
“Retractions” (with Pierre Azoulay, Jeffery Furman, and Fiona Murray). Review of Economics and Statistics, 97(5), December 2015, pp. 1118-1136. Also NBER Working Paper #18499.
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To what extent does "false science" impact the rate and direction of scientific change? We examine the impact of more than 1,100 scientific retractions on the citation trajectories of articles that are related to retracted papers in intellectual space but were published prior to the retraction event. Our results indicate that following retraction and relative to carefully selected controls, related articles experience a lasting five to ten percent decline in the rate of citations received. This citation penalty is more severe when the associated retracted article involves fraud or misconduct, relative to cases where the retraction occurs because of honest mistakes. In addition, we find that the arrival rate of new articles and funding flows into these fields decrease after a retraction. We probe the mechanisms that might underlie these negative spillovers. The evidence is consistent with the view that scientists avoid retraction-afflicted fields lest their own reputation suffer through mere association, but we cannot rule out the possibility that our estimates also reflect scientists' learning about these fields' shaky intellectual foundations.
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Risk perception is a key driver of human behavior, especially in the context of health decisions. Understanding the relationships between new information, risk perception, and behavior is particularly crucial for societal choices regarding new health information technologies, where genetic testing has been especially controversial. Here, we use the genomic test results and survey responses from 617 consumers enrolled in the Impact of Personal Genomics (PGen) Study to test how direct-to-consumer genomic testing customers change their risk perceptions in response to their results, and how these perception changes translate into medical actions. Our findings suggest that individuals change their risk perceptions in directions consistent with their results, and that these perception changes are greater in response to good news than bad news. Our findings also show that medical follow-up actions were driven more by comparatively large risk perception increases for a single condition, than by average trends across an individual’s results.
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“The impact of personal genomics on risk perceptions and medical decision-making” (with Fiona Murray, J. Scott Roberts, and Robert C. Green). Nature Biotechnology, 34(9), September 2016: 912-18.
Other Work:
Braun, A., Zhang, S., Miettinen, H.E., Ebrahim, S., Holm, T.M., Vasile, E., Post, M.J., Yoerger D.M., Picard, M.H., Krieger, J.L., Andrews, N.C., Simons, M., and Krieger, M.. 2003. “Probucol prevents early coronary heart disease and death in the high-density lipoprotein receptor SR-BI/apolipoprotein E double knockout mouse.” Proceedings of the National Academy of Science, 100(12): 7283-7288..