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Size Metrics and Dynamics of Firms Expansion in the European Pharmaceutical Industry

Author

Listed:
  • Franco Mariuzzo

    (UCD Geary Institute, University College Dublin, Ireland)

  • Xiaoheng Zhang

    (Economic and Social Research Institute, Dublin, Ireland)

Abstract

We generalize the growth-of-firm literature by linking alternative metrics of size via a Copula approach. We look at the result of the fitted Copula and justify the metric we base our analysis upon. We employ the Amadeus dataset and investigate the growth dynamics of the European pharmaceutical industry in the Single Market Programme era, 1990–2004. Relying on a set of dynamic panel Probit methods that deal with unobserved heterogeneity and initial conditions, we analyze how our units of investigation, multinationals, capture opportunities over time. We find strong evidence of state dependence and mean reversion, as predicated by the theory of maturation — firms face a period of rapid growth, followed by a slow down, or even a stop, in growth. We finish off our exercise by conditioning the fitted Copula on the predicted measure of size and simulate the remaining measures.

Suggested Citation

  • Franco Mariuzzo & Xiaoheng Zhang, 2010. "Size Metrics and Dynamics of Firms Expansion in the European Pharmaceutical Industry," Working Papers 201037, Geary Institute, University College Dublin.
  • Handle: RePEc:ucd:wpaper:201037
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    File URL: http://www.ucd.ie/geary/static/publications/workingpapers/gearywp201037.pdf
    File Function: First version, 2010
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    More about this item

    Keywords

    Copula; Dynamic Nonlinear Panel Data Models; Entry; Firms Growth; Lower Bound; Pharmaceutical Industry; Single Market Programme; Unobserved Heterogeneity;

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics

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