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R&D investment and total factor productivity in China’s pharmaceutical industry: The moderating effect of the centralized procurement policy

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  • Xiujuan Li
  • Jiachun Xu

Abstract

We use the implementation of China’s centralized procurement policy as a quasi-natural experiment to examine the effects of China’s centralized procurement policy on pharmaceutical research and development (R&D) investment and total factor productivity (TFP). Empirical findings demonstrate that the positive impact of R&D investment on TFP has a delayed effect in the pharmaceutical sector. The centralized procurement policy shortens this lagged effect by imposing survival pressure and pushing companies to enhance their R&D investment intensity significantly. From the heterogeneity perspective, for companies facing significant financing constraints, the centralized procurement policy significantly enhances the intensity of R&D investment. In contrast, for companies with weaker finance limitations, the impact of the policy on their R&D investment intensity is insignificant. Still, the positive moderating effect of the policy on the relationship between R&D investment and TFP is more pronounced. Based on the findings, policymakers need to take a long-term view and consider the diversified influence of different enterprises. Policies that reduce financing constraints and create an enabling environment for sustained R&D are important and complementary.

Suggested Citation

  • Xiujuan Li & Jiachun Xu, 2025. "R&D investment and total factor productivity in China’s pharmaceutical industry: The moderating effect of the centralized procurement policy," PLOS ONE, Public Library of Science, vol. 20(5), pages 1-16, May.
    • Handle: RePEc:plo:pone00:0324519
    DOI: 10.1371/journal.pone.0324519
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    3. Czarnitzki, Dirk & Hussinger, Katrin, 2004. "The Link Between R&D Subsidies, R&D Spending and Technological Performance," ZEW Discussion Papers 04-56, ZEW - Leibniz Centre for European Economic Research.
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