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Scale, Scope and Spillovers: The Determinants of Research Productivity in the Pharmaceutical Industry

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  • Rebecca Henderson
  • Iain Cockburn
Abstract
This paper presents the results of a study of the determinants of research productivity in the pharmaceutical industry. Using disaggregated, internal firm data at the research program level from ten major pharmaceutical companies, we find no evidence of increasing returns to scale at either the firm or the research program level. However our results suggest that there are three benefits to running research programs within the context of larger and more diversified R&D efforts: economies of scale arising from sharing fixed costs; economies of scope arising from the opportunity to exploit knowledge across program boundaries within the firm; and the enhanced ability to absorb internal and external spillovers. We also find that spillovers between firms may playa major role in increasing research productivity. The paper also speaks directly to the question of firm heterogeneity. A significant proportion of the "firm effect" identified in previous studies can be explained by the slowly changing composition of the research portfolio, as well as by less easily measured aspects of innovative capability.

Suggested Citation

  • Rebecca Henderson & Iain Cockburn, 1993. "Scale, Scope and Spillovers: The Determinants of Research Productivity in the Pharmaceutical Industry," NBER Working Papers 4466, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:4466
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    References listed on IDEAS

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    Cited by:

    1. Cockburn, Iain & Henderson, Rebecca, 1994. "Racing to Invest? The Dynamics of Competition in Ethical Drug Discovery," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 3(3), pages 481-519, Fall.
    2. Vanhaverbeke, Wim & Li, Ying & Van de Vrande, Vareska, 2009. "The dual role of external corporate venturing in technological exploration," MPRA Paper 26488, University Library of Munich, Germany, revised 2010.
    3. Boyan Jovanovic, 1993. "The Diversification of Production," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(1 Microec), pages 197-247.
    4. Catalina Martínez, 2011. "Patent families: When do different definitions really matter?," Scientometrics, Springer;Akadémiai Kiadó, vol. 86(1), pages 39-63, January.
    5. Lorenz, Steffi, 2015. "Diversität und Verbundenheit der unternehmerischen Wissensbasis: Ein neuartiger Messansatz mit Indikatoren aus Innovationsprojekten," Discussion Papers on Strategy and Innovation 15-01, Philipps-University Marburg, Department of Technology and Innovation Management (TIM).
    6. Austin, David H., 2000. "Patents, Spillovers, and Competition in Biotechnology," Discussion Papers 10808, Resources for the Future.
    7. Claude DUPUY & Matthieu MONTALBAN & Sylvain MOURA, 2009. "Finance and Industrial Dynamics (In French)," Cahiers du GREThA (2007-2019) 2009-24, Groupe de Recherche en Economie Théorique et Appliquée (GREThA).
    8. Harabi, Najib, 1995. "Channels of R&D Spillovers: An Empirical Investigation," MPRA Paper 26270, University Library of Munich, Germany.
    9. Ricardo F. Díaz & Blanca Sanchez-Robles, 2020. "Non-Parametric Analysis of Efficiency: An Application to the Pharmaceutical Industry," Mathematics, MDPI, vol. 8(9), pages 1-27, September.
    10. Zvi Griliches, 1998. "Productivity, R&D, and the Data Constraint," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 347-374, National Bureau of Economic Research, Inc.
    11. Toole, Andrew A., 2011. "The impact of public basic research on industrial innovation: Evidence from the pharmaceutical industry," ZEW Discussion Papers 11-063, ZEW - Leibniz Centre for European Economic Research.
    12. Husted, Kenneth, 1999. "Between Autonomy and Control: The role of industrial researchers’ decision-making," Working Papers 11/1999, Copenhagen Business School, Department of Management, Politics & Philosophy.
    13. C. Piga & M. Vivarelli, 2003. "Sample selection in estimating the determinants of cooperative R&D," Applied Economics Letters, Taylor & Francis Journals, vol. 10(4), pages 243-246.

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    More about this item

    JEL classification:

    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics

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