“Corporate R&D Investments Following Competitors’ Voluntary Disclosures Evidence from the Drug Development Process” by Miss Yue Zhang
Miss Yue Zhang
Ph.D. Candidate in Accounting
Joseph M. Katz Graduate School of Business
University of Pittsburgh
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.