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KMID : 1170320170230030037
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Korean Journal of Health Economics and Policy
2017 Volume.23 No. 3 p.37 ~ p.62
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Research on R&D Investment, Size and Performance of the Firms in the Pharmaceutical Industry
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Sakong Jin
Kwon Ji-Seon
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Abstract
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As the population ages, the market demand for new drugs is increasing. However, South Korea`s pharmaceutical industry takes a profit structure on Generics, and an excessive number of companies make exclusive competitive market compared to the market size.
We tested Schumpeter Mark Ⅱ, which is a theory of industrial organization theory and claims the positive relationship between R&D investment and the firm size. We also analyzed the effect of R&D on firm`s performance in the listed companies. In addition, we estimated the panel logistic regression to conduct an empirical analysis on the determinants of developing new drug and IMD.
Estimation results showed the U-shaped relationship between the firm size and R&D intensities; Schumpeter hypothesis was established in about 75% of listed companies. R&D intensity has a positive influence on market capitalization.
As a result of the analysis on the whole pharmaceutical industry, We found that the larger the amount of R&D investment is in two years, the higher the probability of developing new drugs and IMD is. Therefore, we found that there is an organic positive relationship between R&D, the firm size, firm performance and development of new drugs.
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KEYWORD
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Pharmaceutical industry, Schumpeter Mark Ⅱ, R&D investment, Performance of the firm, Development of new drugs
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