Research and development efforts in Indian pharmaceutical industry: How much does it matter?
International Journal of Pharmaceutical and Healthcare Marketing
ISSN: 1750-6123
Article publication date: 13 September 2021
Issue publication date: 27 October 2021
Abstract
Purpose
The economic value generated by a firm is determined by the efficient management of its resources within a given business environment. The Indian pharmaceutical industry is highly competitive and has attracted huge investments in research and development (R&D), including financing of biotechnological ventures, clinical trials, contract research activities in addition to traditional product development and filing of regulatory requirements. This study aims to identify the specific resources that are significant drivers of performance.
Design/methodology/approach
Data analysis uses panel regression based on an extended version of the Cobb-Douglas production function, where the dependent variable firm performance is measured using annual sales whilst the independent variables include labour, capital, R&D investments and marketing efforts. This study uses data spanning a period of 7 years (2012–2018) collected from 151 Indian pharmaceutical firms.
Findings
Contrary to the general understanding that R&D investments tend to create profitable opportunities, it is observed that R&D expenditures have a negative impact on sales in the short to medium time period. This study also highlights the finding that in addition to the positive impact of labour and capital, marketing efforts are more likely to have a greater positive influence on firm performance than R&D.
Originality/value
The uniqueness of the paper lies not only in the counterintuitive findings but also in the methodology used to capture the impact of the lagged effect of R&D investments on firm performance. Specifically, a regression model-based both on panel data and time-series averages is used to examine the said impact.
Keywords
Acknowledgements
We express their sincere thanks and gratitude to both the anonymous referee for their constructive comments, feedbacks, and suggestions, which helped in improving the quality of the paper significantly. We are also thankful to Dr Soumya Sivakumar, Marymount University, Arlington, USA for agreeing to go through the manuscript and providing her constructive suggestion about our research study.
Citation
Shivdas, A. and Ray, S. (2021), "Research and development efforts in Indian pharmaceutical industry: How much does it matter?", International Journal of Pharmaceutical and Healthcare Marketing, Vol. 15 No. 4, pp. 534-549. https://doi.org/10.1108/IJPHM-01-2020-0004
Publisher
:Emerald Publishing Limited
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