Time-To-Market and Product Innovativeness in Pharmaceutical New Drug Development Projects

R&D is a critical component of new product development. In this paper, we develop a theoretical framework for understanding how the performance of a firm¡¯s R&D mode choice between in-house and licensing is dependent on two crucial aspects of new product market entry strategies: time-to-market and product innovativeness. Based on a sample of new drugs approved by the FDA during 1990-2000, we find that entry strategies that result in high performance vary between in-house and licensing mode. Shortening time to market is critical for licensing modes while pursuing high product innovativeness is a key success factor for in-house modes. Our findings indicate that implementing the entry strategies suitable for each R&D mode is a crucial factor for the success of new product development.