R&D portfolio strategy and performance

About this book

This paper explores the underlying causes of volatility in R&D performance over time at the firm level. R&D performance volatility has not been deeply examined in the innovation literature despite the fact that it plays a critical role in industries such as pharmaceuticals or the movie industry, where firms often undergo "hot" and "cold" streaks in R&D output. In this paper, we use a simulation model to explore such phenomenon, building on insights from behavioral theories of the firm: we argue that the swings in performance, while rooted in uncertainty, are exacerbated by the behavioral influences in how decision makers deal with risk and uncertainty in R&D.