Technology, Competition and the Time of Entry: Diversification Patterns in the Development of New Drugs
AbstractThis paper empirically investigates the determinants of R&D diversification strategies in the drug industry. It enriches the existing literature by proposing to look at diversification factors, which reflect market and technological proximity of an R&D project towards other projects within a firm's portfolio as well as R&D competition factors. Additionally, the characteristics of R&D in the market where a new potential product is developed affiect future product choice. The analysis is performed for products-in-development data, merged with firms' patents, which allows us to separate project proximity in market niches from technological proximity. The results of empirical estimation support an idea that R&D diversification is governed by the economies of scope as well as the escape competition motive. Moreover, it is found that competition rather than spillovers in the niche where an R&D project is developed defines firms' decisions to diversify.
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Bibliographic InfoPaper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2009-078.
Date of creation: 29 Sep 2009
Date of revision:
diversification; technological diversity; relatedness; competition; R&D;
Find related papers by JEL classification:
- O32 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Management of Technological Innovation and R&D
- L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
- L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-10-10 (All new papers)
- NEP-COM-2009-10-10 (Industrial Competition)
- NEP-INO-2009-10-10 (Innovation)
- NEP-MIC-2009-10-10 (Microeconomics)
- NEP-PPM-2009-10-10 (Project, Program & Portfolio Management)
- NEP-TID-2009-10-10 (Technology & Industrial Dynamics)
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