I believe that this is a quantifiable decision. Projects that are input into a company’s development pipeline should be assigned a market value and a probability of being launched. In an economic downturn, only those projects with higher probablities of success could be pursued, thereby minimizing innovation risk. Of course, the downside is that this approach is unlikely to produce a blockbuster new product, but that’s a trade-off to be considered during weaker economic times.
This is similar to investment portfolio strategy, where a investments are assigned probablities and rates of return, resulting in a projected “portfolio” value. In more uncertain times, the portfolio risk can be reduced by removing the higher-risk investments to increase the certainty of the return. The same logic can be applied to a portfolio of new products in a pipeline.