Conference Agenda

We document a form of "excess" commitment to R&D projects and examine the consequences for innovation outcomes and consumer welfare, using detailed data on pharmaceutical firms' clinical trial projects. Plausibly-exogenous delays in the completion of the preceding trial-phase, empirically uncorrelated with various project-quality measures, substantially reduce firms' subsequent project termination propensity. This excess project commitment intensifies when the CEO has higher stock-price-compensation sensitivity and is personally responsible for the project’s initiation. Welfare implications are nuanced: delay-driven commitment induces investment crowd-out, while not predicting increased adverse effects in marginally-launched drugs and predicting continuation of drugs for diseases lacking alternative treatments.