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Entangled decisions: Knowledge interdependencies and terminations of patented inventions in the pharmaceutical industry

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  • Rajat Khanna
  • Isin Guler
  • Atul Nerkar

Abstract

Research Summary: This study explores the role of knowledge interdependencies on the termination of patented inventions. Termination refers to the abandonment of inventive efforts that are no longer deemed promising. We argue that high interdependencies between an inventive effort and the other inventions in the same research program will increase the cognitive burden on managers and decrease the likelihood of termination. Further, in the presence of interdependencies, managers are likely to rely on heuristics for termination decisions. We focus on two such heuristics: interdependencies of an invention with those in other research programs and the level of external competition in the research program. We test our hypotheses with longitudinal data on patent terminations through non‐payment of renewal fees in the pharmaceutical industry. Managerial Summary: Effective management of innovation portfolios requires termination of opportunities that are no longer promising. Most current tools on termination assume that opportunities to be evaluated are independent from one another. This assumption may limit their usefulness in increasingly complex research domains, such as pharmaceutical R&D. In this study, we investigate how interdependencies among inventions influence firms' tendency to terminate those inventions. Our results on patent terminations show that a patent that is more interdependent with other patents in the same research program is less likely to be terminated. This suggests that managers may have difficulty in evaluating the inherent value of interdependent opportunities. This result is stronger when the patent is less interdependent with those in other research programs or in a more competitive area.

Suggested Citation

  • Rajat Khanna & Isin Guler & Atul Nerkar, 2018. "Entangled decisions: Knowledge interdependencies and terminations of patented inventions in the pharmaceutical industry," Strategic Management Journal, Wiley Blackwell, vol. 39(9), pages 2439-2465, September.
    • Handle: RePEc:bla:stratm:v:39:y:2018:i:9:p:2439-2465
    DOI: 10.1002/smj.2923
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    Citations

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    Cited by:

    1. Wang, Tao, 2023. "Toward an understanding of innovation failure: The timing of failure experience," Technovation, Elsevier, vol. 125(C).
    2. Wang, Qinyu Ryan & Zheng, Yanfeng, 2022. "Nest without birds: Inventor mobility and the left-behind patents," Research Policy, Elsevier, vol. 51(4).
    3. Vivek Tandon & Navid Asgari & Ram Ranganathan, 2023. "Divestment of relational assets following acquisitions: Evidence from the biopharmaceutical industry," Strategic Management Journal, Wiley Blackwell, vol. 44(4), pages 1013-1052, April.
    4. Rajat Khanna & Isin Guler, 2022. "Degree assortativity in collaboration networks and invention performance," Strategic Management Journal, Wiley Blackwell, vol. 43(7), pages 1402-1430, July.
    5. Khanna, Rajat, 2023. "Passing the torch of knowledge: Star death, collaborative ties, and knowledge creation," Research Policy, Elsevier, vol. 52(1).
    6. Puay Khoon Toh & Gautam Ahuja, 2022. "Integration and appropriability: A study of process and product components within a firm's innovation portfolio," Strategic Management Journal, Wiley Blackwell, vol. 43(6), pages 1075-1109, June.
    7. Khanna, Rajat, 2021. "Aftermath of a tragedy: A star's death and coauthors’ subsequent productivity," Research Policy, Elsevier, vol. 50(2).

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