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The determinants of pharmaceutical research and development expenditures

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  • Henry Grabowski

    ()
    (Department of Economics, Duke University, Durham, NC 27708, USA)

  • John Vernon

    ()
    (Department of Economics, Duke University, Durham, NC 27708, USA)

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    Abstract

    Since the late 1970s, pharmaceutical R&D has grown at a rapid rate relative to sales and other variables. In this paper, we examine the determinants of pharmaceutical R&D using a pooled data sample of 11 major drug firms over the period 1974 to 1994. We find that expected returns and cash flows are important explanatory variables of firm research intensities during this period. This is consistent with our results for an earlier sample period characterized by very different growth patterns on R&D.

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    Bibliographic Info

    Article provided by Springer in its journal Journal of Evolutionary Economics.

    Volume (Year): 10 (2000)
    Issue (Month): 1 ()
    Pages: 201-215

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    Handle: RePEc:spr:joevec:v:10:y:2000:i:1:p:201-215

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    Web page: http://link.springer.de/link/service/journals/00191/index.htm

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    Related research

    Keywords: Pharmaceuticals - R&D - Innovation - Cash flow - Expected returns;

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    Cited by:
    1. Yang, Chih-Hai & Tseng, Yu-Hsuan & Chen, Chiang-Ping, 2012. "Environmental regulations, induced R&D, and productivity: Evidence from Taiwan's manufacturing industries," Resource and Energy Economics, Elsevier, vol. 34(4), pages 514-532.
    2. Jörg Mahlich & Thomas Roediger-Schluga, 2006. "The Determinants of Pharmaceutical R&D Expenditures: Evidence from Japan," Review of Industrial Organization, Springer, vol. 28(2), pages 145-164, 03.
    3. Toole, Andrew A., 2005. "Does Public Scientific Research Complement Industry R&D Investment? The Case of NIH Supported Basic and Clinical Research and Pharmaceutical Industry R&D," ZEW Discussion Papers 05-75, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    4. Rodrigo Cerda, 2007. "Endogenous innovations in the pharmaceutical industry," Journal of Evolutionary Economics, Springer, vol. 17(4), pages 473-515, August.
    5. John A. Vernon, 2005. "Examining the link between price regulation and pharmaceutical R&D investment," Health Economics, John Wiley & Sons, Ltd., vol. 14(1), pages 1-16.
    6. Patricia M. Danzon & Eric L. Keuffel, 2013. "Regulation of the Pharmaceutical-Biotechnology Industry," NBER Chapters, in: Economic Regulation and Its Reform: What Have We Learned?, pages 407-484 National Bureau of Economic Research, Inc.
    7. Bakker, Gerben, 2013. "Money for nothing: How firms have financed R&D-projects since the Industrial Revolution," Research Policy, Elsevier, vol. 42(10), pages 1793-1814.
    8. Alex Coad & Rekha Rao, 2010. "Firm growth and R&D expenditure," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 19(2), pages 127-145.
    9. Bastian Rake, 2012. "Determinants of Pharmaceutical Innovation: The Role of Technological Opportunities Revisited," Jena Economic Research Papers 2012-018, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
    10. Thomas A. Abbott & John A. Vernon, 2005. "The Cost of US Pharmaceutical Price Reductions: A Financial Simulation Model of R&D Decisions," NBER Working Papers 11114, National Bureau of Economic Research, Inc.
    11. John Vernon & Joseph Golec & J. Stevens, 2010. "Comparative Effectiveness Regulations and Pharmaceutical Innovation," PharmacoEconomics, Springer, vol. 28(10), pages 877-887, October.
    12. Balconi, Margherita & Brusoni, Stefano & Orsenigo, Luigi, 2010. "In defence of the linear model: An essay," Research Policy, Elsevier, vol. 39(1), pages 1-13, February.
    13. William Kingston, 2004. "Nelson's Concerns About Intellectual Property," Levine's Working Paper Archive 122247000000000461, David K. Levine.
    14. Rutger P. Daems PhD & Edith L. Maes DBA, 2013. "Pharmaceutical Portfolio Management: Global Disease Burden and Corporate Performance Metrics," Working Papers 2013/07, Maastricht School of Management.
    15. Henry Grabowski & John Vernon & Joseph DiMasi, 2003. "Returns on R&D for 1990s New Drug Introductions," Levine's Working Paper Archive 618897000000000666, David K. Levine.
    16. Ramesh Govindaraj & Gnanaraj Chellaraj, 2002. "The Indian Pharmaceutical Sector : Issues and Options for Health Sector Reform," World Bank Publications, The World Bank, number 15231, July.
    17. repec:ebl:ecbull:v:6:y:2008:i:36:p:1-8 is not listed on IDEAS
    18. Barrenho, E & Smith, PC & Miraldo, M, 2013. "The determinants of attrition in drug development: a duration analysis," Working Papers 12204, Imperial College, London, Imperial College Business School.

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