The role of intellectual capital in new product development: Can it become a liability?

Given the increasingly high cost of new product development (NPD), it is important for firms to terminate unsuccessful NPD projects as soon as possible. This article investigates the role of intellectual capital in the discontinuation of NPD projects. The three dimensions of intellectual capital (human, structural, and social capital) are posited to decrease the likelihood of discontinuation of NPD projects, while contextual factors such as the firm's discontinuation experience and the size of the drug development portfolio are expected to affect this relationship. The research model is tested using a unique data set of 1,168 drug discovery and development projects. The results suggest that NPD projects rich in all three dimensions of intellectual capital are less likely to be discontinued. The size of the firm's drug development portfolio, however, is found to mitigate these effects, while discontinuation experience enhances the relationship between intellectual capital and discontinuation duration. As only a fraction of new product development initiatives result in success, timely discontinuation of unsuccessful projects is critical for sustained performance of organizations. Our findings make an important contribution to this stream of work. By highlighting the role of intellectual capital in the discontinuation process, we offer an interesting twist to the literature that invariably assumes intellectual capital to be important for innovation.

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