IDEAS home Printed from https://ideas.repec.org/a/sae/fbbsrw/v9y2020i4p319-334.html
   My bibliography  Save this article

Is There Any Impact of R&D on Financial Performance? Evidence from Indian Pharmaceutical Companies

Author

Listed:
  • Mithun Nandy

Abstract

This intention of this research article is to analyze the impact of research and development (R&D) activities on the financial performance of Indian pharmaceutical companies listed with the national stock exchange (NSE) of India. Strongly balanced panel dataset of 40 sample pharmaceutical companies for the period of 1998-2019 (21 years) has been used. In the empirical analysis section: Descriptive Statistics, Bivariate Correlation Matrix, Variation Inflation Factor, Skewness/Kurtosis Tests, Breusch-Godfrey LM Test, Heteroskedasticity Test, Levin-Lin-Chu Unit-Root Test, Generalized Method of Moments (GMM) and panel regression models (Fixed Effect Model and Random Effect Model) followed by Hausman Test have been discussed. For data analysis purpose, STATA (version 12.0) software has been used. To analyze the impact of R&D on financial performance, four different financial performance related variables: Sales Turnover, Return on Assets, Return on Equity, and Market Capitalization have been used as dependent variables and these variables have been placed one after another in four different empirical models which have been estimated in this study. The study has revealed that there is a significant positive impact of R&D activities on the financial performance of Indian pharmaceutical companies listed with NSE during the study period.

Suggested Citation

  • Mithun Nandy, 2020. "Is There Any Impact of R&D on Financial Performance? Evidence from Indian Pharmaceutical Companies," FIIB Business Review, , vol. 9(4), pages 319-334, December.
    • Handle: RePEc:sae:fbbsrw:v:9:y:2020:i:4:p:319-334
    DOI: 10.1177/2319714520981816
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/2319714520981816
    Download Restriction: no
    File URL: https://libkey.io/10.1177/2319714520981816?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Kafouros, Mario I. & Forsans, Nicolas, 2012. "The role of open innovation in emerging economies: Do companies profit from the scientific knowledge of others?," Journal of World Business, Elsevier, vol. 47(3), pages 362-370.
    2. Feng-Jui Hsu & Mu-Yen Chen & Yu-Cheng Chen & Wei-Chieh Wang, 2013. "An Empirical Study on the Relationship between R&D and Financial Performance," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 3(5), pages 1-9.
    3. Michael J. Cooper & Huseyin Gulen & Michael J. Schill, 2008. "Asset Growth and the Cross‐Section of Stock Returns," Journal of Finance, American Finance Association, vol. 63(4), pages 1609-1651, August.
    4. Anjala Kalsie & Aishwarya Nagpal, 2018. "The Determinants of Corporate Debt Maturity for NSE-Listed Corporates," FIIB Business Review, , vol. 7(1), pages 43-56, March.
    5. Susan E Feinberg & Sumit K Majumdar, 2001. "Technology Spillovers from Foreign Direct Investment in the Indian Pharmaceutical Industry," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 32(3), pages 421-437, September.
    6. Ramani, Shyama V., 2002. "Who is interested in biotech? R&D strategies, knowledge base and market sales of Indian biopharmaceutical firms," Research Policy, Elsevier, vol. 31(3), pages 381-398, March.
    7. Gary Erickson & Robert Jacobson, 1992. "Gaining Comparative Advantage Through Discretionary Expenditures: The Returns to R&D and Advertising," Management Science, INFORMS, vol. 38(9), pages 1264-1279, September.
    8. Chittoor, Raveendra & Ray, Sougata, 2007. "Internationalization paths of Indian pharmaceutical firms -- A strategic group analysis," Journal of International Management, Elsevier, vol. 13(3), pages 338-355, September.
    9. Pradhan, Jaya Prakash, 2003. "Liberalization, Firm Size and R&D performance: A Firm Level Study of Indian Pharmaceutical Industry," MPRA Paper 17079, University Library of Munich, Germany.
    10. Gunday, Gurhan & Ulusoy, Gunduz & Kilic, Kemal & Alpkan, Lutfihak, 2011. "Effects of innovation types on firm performance," International Journal of Production Economics, Elsevier, vol. 133(2), pages 662-676, October.
    11. Ehie, Ike C. & Olibe, Kingsley, 2010. "The effect of R&D investment on firm value: An examination of US manufacturing and service industries," International Journal of Production Economics, Elsevier, vol. 128(1), pages 127-135, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Muhammad Usman Yousaf & Muhammad Kashif Khurshid & Aftab Ahmed & Muhammad Zulfiqar, 2019. "Empirical investigation of relationship between research and development intensity and firm performance: The role of ownership structure and board structure," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 6(02), pages 1-27, June.
    2. Mukherjee, Debmalya & Kumar, Satish & Mukherjee, Deepraj & Goyal, Kirti, 2022. "Mapping five decades of international business and management research on India: A bibliometric analysis and future directions," Journal of Business Research, Elsevier, vol. 145(C), pages 864-891.
    3. Tohru Yoshioka-Kobayashi & Tomofumi Miyanoshita & Daisuke Kanama, 2020. "Revisiting incremental product innovations in the food-manufacturing industry: an empirical study on the effect of intellectual property rights," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 9(1), pages 1-19, December.
    4. Alam, Ashraful & Uddin, Moshfique & Yazdifar, Hassan & Shafique, Sujana & Lartey, Theophilus, 2020. "R&D investment, firm performance and moderating role of system and safeguard: Evidence from emerging markets," Journal of Business Research, Elsevier, vol. 106(C), pages 94-105.
    5. Başak Dalgıç & Burcu Fazlıoğlu, 2021. "Innovation and firm growth: Turkish manufacturing and services SMEs," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 11(3), pages 395-419, September.
    6. Guennif, Samira & Ramani, Shyama V., 2012. "Explaining divergence in catching-up in pharma between India and Brazil using the NSI framework," Research Policy, Elsevier, vol. 41(2), pages 430-441.
    7. Rubén Martínez-Alonso & María J. Martínez-Romero & Alfonso A. Rojo-Ramírez, 2019. "Examining the Impact of Innovation Forms on Sustainable Economic Performance: The Influence of Family Management," Sustainability, MDPI, vol. 11(21), pages 1-22, November.
    8. Adcock, Christopher & Hua, Xiuping & Mazouz, Khelifa & Yin, Shuxing, 2014. "Does the stock market reward innovation? European stock index reaction to negative news during the global financial crisis," Journal of International Money and Finance, Elsevier, vol. 49(PB), pages 470-491.
    9. Anna Lamin & Miguel A. Ramos, 2016. "R&D investment dynamics in agglomerations under weak appropriability regimes: Evidence from Indian R&D labs," Strategic Management Journal, Wiley Blackwell, vol. 37(3), pages 604-621, March.
    10. Gehl Sampath, Padmashree, 2006. "India's product patent protection regime: Less or more of "pills for the poor"?," MERIT Working Papers 2006-019, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    11. Shamir, Noam & Zvilichovsky, David, 2022. "Dynamic reputation, project selection and market efficiency: The importance of small projects," International Journal of Production Economics, Elsevier, vol. 248(C).
    12. Dejan Ravšelj & Aleksander Aristovnik, 2020. "The Impact of R&D Expenditures on Corporate Performance: Evidence from Slovenian and World R&D Companies," Sustainability, MDPI, vol. 12(5), pages 1-20, March.
    13. Loitongbam, Bishwanjit Singh, 2016. "Globalization and Innovation in the Indian Pharmaceutical Industry," MPRA Paper 75925, University Library of Munich, Germany, revised 27 May 2016.
    14. Ali Ostadhashemi & Muhammad Esmaeil Fadaei Nejad, 2019. "To study moderating role of ownership structure on R&D expenditure policies on accounting performance and market value," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 6(01), pages 1-18, March.
    15. H Saranga & R D Banker, 2010. "Productivity and technical changes in the Indian pharmaceutical industry," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 61(12), pages 1777-1788, December.
    16. Amanpreet Kaur & Balwinder Singh, 2019. "Does Investment in R&D Affect Firm Reputation: Indian Experience," Journal of Entrepreneurship and Innovation in Emerging Economies, Entrepreneurship Development Institute of India, vol. 5(2), pages 98-109, July.
    17. Juan Vicente García Manjón & Rafael Mompó & Judith Redoli, 2016. "Accelerating Innovation in Small and Medium-Sized Enterprises in the ICT Services Sector," SAGE Open, , vol. 6(3), pages 21582440166, September.
    18. David Hirshleifer & Danling Jiang, 2010. "A Financing-Based Misvaluation Factor and the Cross-Section of Expected Returns," The Review of Financial Studies, Society for Financial Studies, vol. 23(9), pages 3401-3436.
    19. Tedjo Soelaksono & Achmad Sudiro & Mintarti Rahayu & Sudjatno Sudjatno, 2018. "The Influence of Capability Managerial on Competitiveness of the Company through the Planning Strategy, Investment, Innovation and Performance of the Company (a Study on Corporate Manufacturing Indust," International Review of Management and Marketing, Econjournals, vol. 8(2), pages 22-32.
    20. Marius Băban & Călin Florin Băban & Tudor Mitran, 2023. "Universities as an External Knowledge Source for Industry: Investigating the Antecedents’ Impact on the Importance Perception of Their Collaboration in Open Innovation Using an Ordinal Regression-Neur," Mathematics, MDPI, vol. 11(7), pages 1-23, March.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:fbbsrw:v:9:y:2020:i:4:p:319-334. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.