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The Impact of R&D Cooperation on Drug Variety Offered on the Market: Evidence from the Pharmaceutical Industry

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  • Tannista Banerjee
  • Ralph Siebert
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    Abstract

    This study shows that R&D cooperation can be used as an instrument to coordinate drug development portfolios among participating firms, which has crucial implications on the number of drugs offered on the market. Our study puts special attention to the fact that R&D cooperation, formed at different stages throughout the drug development process, have different impacts on the technology and product markets. Using a comprehensive dataset on the pharmaceutical industry, our results show that R&D cooperation formed at the early stages increase the number of R&D projects and the number of drugs launched on the product market. Late stage R&D cooperation, however, have a positive impact on the drug development process and drug variety only in the short run. In the long run, late stage cooperation provoke that firms re-optimize their drug development portfolios which reduces the number of drugs offered on the market.

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    File URL: http://cla.auburn.edu/econwp/Archives/2013/2013-20.pdf
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    Bibliographic Info

    Paper provided by Department of Economics, Auburn University in its series Auburn Economics Working Paper Series with number auwp2013-20.

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    Date of creation: Nov 2013
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    Handle: RePEc:abn:wpaper:auwp2013-20

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    Web page: http://cla.auburn.edu/economics/
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    Related research

    Keywords: Drug development; Dynamics; Co-development; Pharmaceutical industry; Product variety; Product market competition; Research and Development cooperation;

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    10. Ulset, Svein, 1996. "R&D outsourcing and contractual governance: An empirical study of commercial R&D projects," Journal of Economic Behavior & Organization, Elsevier, vol. 30(1), pages 63-82, July.
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