When there is uncertainty about a new product’s net value, firms treat the timing of the product launch as a real option. When the potential cannibalization costs imposed on existing products are important, the timing decisions are sensitive to competitors’ actions, as they affect these costs. In the pharmaceutical industry, we show that firms often delay new launches until generic entry threats reduce cannibalization costs. This effect is stronger in therapeutic areas with uncertain generic entry and among firms focused on the commercialization of innovation. Our findings highlight how competition can foster innovation by accelerating the commercialization of new products.