R&D investment behavior of US pharmaceutical firms

Abstract

Purpose

The behavioral theory of the firm (BTOF) has been used to explain the research and development (R&D) investment behavior of firms in numerous multi industry studies. However, their partially contradictory results point to the possible need for a single industry perspective that would reduce heterogeneity of business trends, models and other characteristics. This study aims to test this theoretical assumption within the challenging context of the US pharmaceutical industry.

Design/methodology/approach

The research uses data from 20 firms, which number among the largest in the US pharmaceutical industry, over the period 2002-2014. These data are analyzed using fixed- and random-effect panel models.

Findings

The findings generally support the need for a thorough understanding of the industry under study and its specific characteristics. The firms analyzed in this research behave slightly differently from theoretical assumptions, and it is argued that this is caused by industry specific factors. Moreover, the use of two separate aspiration measures – for historical and social aspirations – is supported as it provides more in-depth insight into the firms’ behavior.

Originality/value

This paper, which is based on research presented at the 4th International Conference on Innovation and Entrepreneurship, represents the first inquiry into the R&D investment behavior of pharmaceutical firms using the BTOF. It also represents an argument for conducting single-industry rather than multi industry studies when using this theory.

Citation

Jirásek, M. (2017), "R&D investment behavior of US pharmaceutical firms", International Journal of Innovation Science, Vol. 9 No. 2, pp. 205-219. https://doi.org/10.1108/IJIS-08-2016-0030