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R&D and productivity in the Indian pharmaceutical firms

  • Sharma, Chandan

Recent researches for developing countries suggest knowledge generating activates is no silver bullet for productivity growth. In this context, this paper examines the impact of R&D activities on firms’ performance for the Indian pharmaceutical industry by utilizing the data of the post reform period (1994-2006). The empirical analysis is performed in two stages. In first stage, we examine the relative productivity performance of R&D vis-à-vis non- R&D. Subsequently, we construct two empirical frameworks, namely, growth accounting and production function. Results of analysis indicate that R&D firms have productivity edge over non- R&D firms. Regression results based on the growth accounting framework suggest that R&D intensity has a positive and significant effect (15%) on TFP. The results also confirm that the performance of foreign firms operating in the industry is more sensitive towards R&D than the local firms. Furthermore, the estimation results of the production function approach indicate that the output elasticity to R&D capital varies from 10% to 13%. Therefore, we support the argument that ‘manna from heaven’ impact is large and significant.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 31681.

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Date of creation: 12 Feb 2011
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Handle: RePEc:pra:mprapa:31681
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  13. Branstetter, Lee & Chen, Jong-Rong, 2006. "The impact of technology transfer and R & D on productivity growth in Taiwanese industry: Microeconometric analysis using plant and firm-level data," Journal of the Japanese and International Economies, Elsevier, vol. 20(2), pages 177-192, June.
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  16. Vincenzo Atella & Beniamino Quintieri, 2001. "Do R&D expenditures really matter for TFP?," Applied Economics, Taylor & Francis Journals, vol. 33(11), pages 1385-1389.
  17. Sharma, Chandan, 2010. "Does Productivity Differ in Domestic and Foreign Firms? Evidence from the Indian Machinery Industry," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 45(1), pages 87-110.
  18. Raut, Lakshmi K., 1995. "R & D spillover and productivity growth: Evidence from Indian private firms," Journal of Development Economics, Elsevier, vol. 48(1), pages 1-23, October.
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