Examining new product development project termination decision quality at the portfolio level: Consequences of dysfunctional executive advocacy

• Terminating New Product Development (NPD) projects is an important economic and strategic decision.
• Previous studies have examined this decision at the project level instead of the organizational or portfolio level.
• Organizational NPD termination decisions are influenced by both behavioral and structural portfolio governance mechanisms.
• We examine 150 termination decisions in R&D portfolios in 40 German pharmaceutical companies.
• Results support previous findings that structural governance components can and should be used to mediate executive behavior.
• However, our findings show these factors alone will not ensure high quality NPD termination decisions.
• NPD termination decision quality can only be improved when we address dysfunctional executive advocacy of pet projects.

When to terminate a new product development (NPD) project is an important economic decision and an interesting managerial dilemma. To date research examining NPD termination decisions has been largely focused on the single project level examining the impact of formal termination decision processes. This study examines these decisions at the organizational level exploring the impact of both executive advocacy behaviors and organizational context on the quality of 150 termination decisions in 40 German R&D units of pharmaceutical companies. We confirm that adopting termination decision processes such as formal decision criteria and decision committees has positive influences on the quality of the termination decision. However, our results also demonstrate that dysfunctional executive advocacy behavior has a greater negative influence on the quality of project termination decision suggesting that, while organizational governance components can and should be used to mediate executive behaviors, these factors alone will not ensure high quality NPD termination decisions.