We examine the role of spillover learning in shaping the value of exploratory versus incremental R&D. Using data from drug development, we show that novel drug candidates generate more knowledge spillovers than incremental ones. Despite being less likely to reach regulatory approval, they are...

This paper examines the role of spillover learning in shaping the value of exploratory versus incremental R&D. Using data from the pharmaceutical industry, we show that novel drug candidates generate more dynamic spillovers than incremental ones. That is, despite being more likely to fail in the...