Exploration and the termination of inventions: the role of the structure of the firm’s knowledge base and its failure experience

Abstract

Firms manage their R&D portfolios by continuously evaluating and selecting which inventive paths to maintain and which ones to terminate. Prior research found that the extent of exploration in an invention increases the invention’s likelihood of termination. We inquire about organisational contingencies that impact the evaluation and selection of exploratory inventions. We suggest that the structure of an organisation’s knowledge base and its failure experience are particularly relevant for better comprehending the conditions under which exploratory inventions are more or less likely to be terminated. We find that the positive effect of exploration on patent termination is weakened with increasing level of decomposability in organisation’s knowledge base and increasing failure experience but only up to the moderate levels of these moderating variables. Empirically, we examine patent maintenance decisions in the biopharmaceutical industry. We discuss the contributions of our study for the research on exploration, invention termination, knowledge networks and failures.

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