“Corporate R&D Investments Following Competitors’ Voluntary Disclosures Evidence from the Drug Development Process” by Miss Yue Zhang
Speaker:
Miss Yue Zhang
Ph.D. Candidate in Accounting
Joseph M. Katz Graduate School of Business
University of Pittsburgh
Abstract:
This paper studies the strategic role of voluntary disclosures in shaping R&D competition. Using the online registration of clinical trials in the drug development process, I find that a firm’s R&D investments are deterred by disclosures of clinical trial initiation from strong rivals but encouraged by disclosures from weak rivals. The cross-sectional analyses suggest that the deterrence effect of peer disclosure is stronger when the therapeutic area has a high clinical-trial success rate, the encouragement effect is stronger when the market is concentrated among a few major players, and both effects are magnified when the focal firm has a diversified R&D portfolio. This study provides the first empirical evidence that the way a firm reacts to peer disclosures of interim R&D success is not homogeneous, but rather varies with these firms’ relative competitiveness in the R&D race.
