Temporal and social distances of the estimated duration of R&D projects in the biopharma industry

Abstract

Biopharmaceutical firms' opportunities depend on the accurate estimation of highly acclaimed clinical trial projects duration. To understand how forecasts of the duration differ from the actual duration, this study uses Construal Level Theory (CLT), which places the future estimates on the different levels of distance in estimation errors. This article explores (a) whether the estimated project duration is indeed longer than the actual duration of the project, and (b) how it differs when considering foreign versus domestic projects. A dataset of 24,953 technology projects in two locations make two discoveries. First, the actual duration of completed projects (past) is likely to be 0.26 times longer than the estimated duration of future projects, implying that project sponsors tend to underestimate the project duration. Second, the foreign versus domestic projects likely to be 0.26 times longer than the domestic sponsors projects. Third, foreign and past project further increases the duration by 0.40 times compared to the domestic and past project. The study resolves the duration issue, contributes to the CLT framework by supporting the psychic distance principle and construal levels. It reveals potential errors in the estimation of the unknown future based on the known past.