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Technology, Competition and the Time of Entry: Diversification Patterns in the Development of New Drugs

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  • Tatiana Plotnikova

    ()
    (DFG Research Training Program "The Economics of Innovative Change", Friedrich-Schiller-University Jena)

Abstract

This 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 Info

Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2009-078.

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Date of creation: 29 Sep 2009
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Handle: RePEc:jrp:jrpwrp:2009-078

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Keywords: diversification; technological diversity; relatedness; competition; R&D;

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