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KMID : 1170320160220040021
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Korean Journal of Health Economics and Policy
2016 Volume.22 No. 4 p.21 ~ p.58
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Study on the Optimal Management of R&D Investment of Korean Pharmaceutical Industry under the Nagoya Protocol : A Real Option Analysis Considering the Competition within the Industry
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Nam Yung-Sik
Hong Won-Kyung
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Abstract
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The industries related with the genetic resources are facing with the situation that they should implement the benefit sharing of the genetic resources, after the ratification of the Nagoya Protocol. Especially, the production cost in the pharmaceutical industry is expected to increase according to the benefit sharing, since the industry has a higher utilization rate of the genetic resources than the other industries, and the R&D investment in this industry can be significantly affected by the Nagoya Protocol. Thus, this study analyzed the optimal timing on the R&D investment of Korean pharmaceutical companies by real option model, considering the benefit sharing and the preemption effect. The result shows that the company leading the R&D investment can get an earlier economic feasibility than the following, but, on the contrary, as the rate of increase of benefit from the R&D investment decreases and the rate of the benefit sharing increases, the timing on the economic feasibility from the R&D investment can be postponed. The result also implies that, as the rate of the benefit sharing increases, the incentive on becoming a leading company can increase.
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KEYWORD
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Nagoya Protocol, the benefit sharing of the genetic resources, real option, preemption effect, the optimal R&D investment
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