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


  • Tatiana Plotnikova

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


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.

Suggested Citation

  • Tatiana Plotnikova, 2009. "Technology, Competition and the Time of Entry: Diversification Patterns in the Development of New Drugs," Jena Economic Research Papers 2009-078, Friedrich-Schiller-University Jena.
  • Handle: RePEc:jrp:jrpwrp:2009-078

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    More about this item


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

    JEL classification:

    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; 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; Plastics

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