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Inventory and financial performance in the pharmaceutical industry: what transpired over the last two decades?

Jeong Hoon Choi (Youngstown State University, Youngstown, Ohio, USA)
Sangdo Choi (Bloomsburg University of Pennsylvania, Bloomsburg, Pennsylvania, USA)
Nallan C. Suresh (University at Buffalo, State University of New York, Buffalo, New York, USA)

International Journal of Operations & Production Management

ISSN: 0144-3577

Article publication date: 12 December 2023

Issue publication date: 4 September 2024

377

Abstract

Purpose

The objective of this study is to explore the structural attributes of the pharmaceutical industry before the onset of the COVID-19 pandemic by examining the relationship between inventory and firm performance and developing a taxonomy of pharmaceutical firms based on the earns-turns matrix.

Design/methodology/approach

This study examines the inventory–firm performance linkage, considering both total inventory and its discrete inventory components in pharmaceutical firms. In addition, this research develops a new taxonomy of pharmaceutical firms based on the earns-turns matrix. A large panel dataset of firms in the US pharmaceutical industry was collected for the period 2000–2019.

Findings

The results reveal that strategic groups identified based on this taxonomy show different levels of profitability and inventory turns in the earns-turns matrix. Most pharmaceutical firms moved from the low-right to the top-left section in the earns-turns matrix, indicating that these firms have generally pursued profitability rather than effective inventory management.

Research limitations/implications

This study explores the structural attributes of the pharmaceutical industry using the earns-turns matrix. This two-dimensional analysis may not, however, capture the full complexity of inventory–firm performance dynamics.

Practical implications

The mapping of strategic groups on the earns-turns matrix provides a useful tool for visual representations of the dynamics of strategic groups in terms of financial performance and inventory management performance. Practitioners can use the earns-turns matrix to benchmark their firm's position against their competitors.

Originality/value

This study broadens the scope of operations management research by introducing the earns-turns matrix as an empirical validation tool for operational and strategic management theories. This study emphasizes the effectiveness of the earns-turns matrix in analyzing strategic groups of pharmaceutical firms.

Keywords

Citation

Choi, J.H., Choi, S. and Suresh, N.C. (2024), "Inventory and financial performance in the pharmaceutical industry: what transpired over the last two decades?", International Journal of Operations & Production Management, Vol. 44 No. 10, pp. 1863-1890. https://doi.org/10.1108/IJOPM-07-2022-0461

Publisher

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Emerald Publishing Limited

Copyright © 2023, Emerald Publishing Limited

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