TY  - JOUR
AB  - Purpose The purpose of the current paper is to examine the nature of profit persistence and to estimate the dynamic relationship between research and development (R&D) intensity and firm profitability in the Indian pharmaceutical industry.Design/methodology/approach A dynamic panel data model with generalized methods of moments (GMMs) technique has been deployed to estimate the relationship between R&D intensity and performance. Arellano and Bond (1991) estimation methodology has been used to generate the estimates. A sample of 55 publicly listed firms operating in the Indian pharmaceutical industry for the period 2005-2014 has been considered.Findings The study finds moderate to heavy profit persistence in the Indian pharmaceutical industry. The study also finds that there exists a positive relationship between R&D intensity and performance for the Indian pharmaceutical Industry. The results hold even after considering two separate measures of profitability – return on assets and return on sales. The results also hint at a possible non-linear relationship between R&D intensity and profitability.Research limitations/implications The results highlight positive profit persistence among pharmaceutical firms. The results also highlight the need for a sustained investment in R&D, as its benefits are driven in the long run. Thus, managers should devise proper policies R&D investments. Also, prospective entrants should properly study the existing entry barriers before deciding upon the mode and timing of entry.Originality/value The degree of profit persistence and the dynamic nature of relationship between R&D intensity and firm performance in the Indian pharmaceutical sector has not been studied. Thus, this paper fills this gap and also highlights the impact of certain firm- and industry-specific variables on profitability.
VL  - 10
IS  - 2
SN  - 1558-7894
DO  - 10.1108/JABS-03-2015-0031
UR  - https://doi.org/10.1108/JABS-03-2015-0031
AU  - Jaisinghani Dinesh
PY  - 2016
Y1  - 2016/01/01
TI  - Impact of R&D on profitability in the pharma sector: an empirical study from India
T2  - Journal of Asia Business Studies
PB  - Emerald Group Publishing Limited
SP  - 194
EP  - 210
Y2  - 2024/04/26
ER  -