This study examines how firms adjust their R&D project portfolios in response to opportunities created by rivals’ project advancements. Drawing on the resource-based view and resource redeployment literature, we explore how rival success influences firms’ decisions to initiate and terminate projects within their R&D portfolios. We propose that rival advancements signal reduced uncertainty and generate valuable knowledge spillovers, prompting firms to allocate resources toward the focal affected market. Using data on drug development pipelines of the U.S. pharmaceutical firms from 2000 to 2019, we find that firms are more likely to initiate new projects in the affected market to capitalize on emerging opportunities while simultaneously terminating projects in related, unaffected markets to reallocate resources efficiently. Furthermore, firms are less likely to initiate new projects in related, unaffected markets to avoid diverting resources from the affected market. These strategies allow firms to achieve economies of scope, reduce adjustment costs, and maintain flexibility for future redeployment.
