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Efficiency Analysis of Indian Pharmaceutical Companies in the Post-TRIPS and Post Product Patent Regime using Stochastic Frontier Approach

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  • Aas Mohammad
  • Bandi Kamaiah

Abstract

This paper analyses the technical efficiency of Indian pharmaceutical industry using the parametric technique; stochastic frontier analysis (SFA) for the period of 1997-2011 which covers both post TRIPS and post product patent period. The results of the study indicate the dominance of raw material in producing the firms’ outputs. Labour as an input variable has emerged as the most significant variable influencing the profit of the firms. There are considerable evidences that the observed outputs are less than their respective potential outputs due to technical inefficiency of firms. The results of the study are very important for the companies to realize their potential output and in dictating their survival and growth in the industry.

Suggested Citation

  • Aas Mohammad & Bandi Kamaiah, 2016. "Efficiency Analysis of Indian Pharmaceutical Companies in the Post-TRIPS and Post Product Patent Regime using Stochastic Frontier Approach," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 19(62), pages 5-24, December.
    • Handle: RePEc:rej:journl:v:19:y:2016:i:62:p:5-24
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    References listed on IDEAS

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    1. Chiranjib Neogi & Atsuko Kamiike & Takahiro Sato, 2012. "Identification of Factors Behind Performance of Pharmaceutical Industries in India," Discussion Paper Series DP2012-23, Research Institute for Economics & Business Administration, Kobe University.
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    3. Gonzalez, Eduardo & Gascon, Fernando, 2004. "Sources of productivity growth in the Spanish pharmaceutical industry (1994-2000)," Research Policy, Elsevier, vol. 33(5), pages 735-745, July.
    4. Mainak Mazumdar & Meenakshi Rajeev, 2009. "A Comparative Analysis of Efficiency and Productivity of the Indian Pharmaceutical Firms: A Malmquist-Meta-Frontier Approach," Working Papers 223, Institute for Social and Economic Change, Bangalore.
    5. Vernon, John M & Gusen, Peter, 1974. "Technical Change and Firm Size: The Pharmaceutical Industry," The Review of Economics and Statistics, MIT Press, vol. 56(3), pages 294-302, August.
    6. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
    7. Mainak Mazumdar & Meenakshi Rajeev, 2009. "Comparing the Efficiency and Productivity of the Indian Pharmaceutical Firms: A Malmquist-Meta-Frontier Approach," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 8(2), pages 159-181, August.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    stochastic frontier analysis; technical efficiency; post TRIPS; product patent regime;
    All these keywords.

    JEL classification:

    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics

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