Commenced in January 2007
Paper Count: 30472
Determinants of Profitability in Indian Pharmaceutical Firms in the New Intellectual Property Rights Regime
Abstract:This study investigates the firm level determinants of profitability of Indian drug and pharmaceutical industry. The study uses inflation adjusted panel data for a period 2000-2013 and applies OLS regression model with Driscoll-Kraay standard errors. It has been found that export intensity, A&M intensity, firm’s market power and stronger patent regime dummy have exercised positive influence on profitability. The negative and statistically significant influence of R&D intensity and raw material import intensity points to the need for firms to adopt suitable investment strategies. The study suggests that firms are required to pay far more attention to optimize their operating expenditures, advertisement and marketing expenditures and improve their export orientation, as part of the long term strategy.
Digital Object Identifier (DOI): doi.org/10.5281/zenodo.1125675Procedia APA BibTeX Chicago EndNote Harvard JSON MLA RIS XML ISO 690 PDF Downloads 1620
 Government of India, 2015, ‘Indian Pharmaceutical Industry - A Global Industry’ Department of Pharmaceuticals.Accessed on Dec. 24, 2015 fromhttp://pharmaceuticals.gov.in/pharma-industry-promotion
 Confederation of Indian Industry (2014), ‘India Pharma Inc.: Changing Landscape of Indian Pharma Industry’, Mumbai. Downloaded on Jan.17, 2016 fromhttps://www.pwc.in/assets/pdfs/publications/2013/changing-landscape-of-the-indian-pharma-industry.pdf
 CMIE Prowess database, 2014
 Apte, P. G., &Vaidyanathan, R. (1982). ‘Concentration, controls and performance in twenty-nine manufacturing industries in India’. Indian Economic Review, 241-262.
 Mazumdar, M. (2013).Performance of Pharmaceutical Companies in India’, Springer.
 Goddard, J., McMillan, D., & Wilson, J. O. (2006). ‘Do firm sizes and profit rates converge? Evidence on Gibrat's Law and the persistence of profits in the long run’. Applied Economics, 38(3), 267-278.
 Tirole, J. (1995), The Theory of Industrial Organisation, Cambridge, Massachusetts, MIT Press.
 Bhagwat, Yatin and DeBruine, Marinus (2011).R&D and Advertising Efficiencies in the Pharmaceutical Industry. International Journal of Applied Economics, 8(1), pp. 55-65.
 Simanjuntak, Destrina Grace and Tjandrawinata, Raymond R. (2011), ‘M&A of Generic Pharmaceutical Companies Increases Productivity’, Available online http://dx.doi.org/10.2139/ssrn.194676
 Mank, D. A., & Nystrom, H. E. (2000). The Relationship Between R&D Spending and Shareholder Returns in the Computer Industry. Engineering Management Society, 2000. Proceedings of the 2000 IEEE,501-504.
 Caves, R. E. (1996). Multinational enterprise and economic analysis. (2nd ed.).Cambridge: Cambridge University Press
 Branch, B. (September. 1974). Research and Development Activity and Profitability: A Distributed Lag Analysis. Journal of Political Economy,999-1011.
 Aboody, D. and B. Lev. 2001. R&D productivity in the chemical industry. Working paper, New York University.
 Jefferson, G., Huamao, B., Xiaojing, G., Xiaoyun, Y. (2006). R&D Performance in Chinese Industry. Economics of Innovation and New Technology, Vol 15(4/5), June/July, pp. 345-366.
 Scherer, Frederic M. (2001), ‘The link between gross profitability and pharmaceutical R&D spending’, Health Affairs. 20:5, pp. 216-220.
 Baumol, W. J. (1958). On the theory of oligopoly. Economica, 187-198.
 Bloom, Paul N. and Philip Kotler (1975). ‘Strategies for High Market-Share Firms’. Harvard Business Review. 53 (6), pp. 63-72.
 Hussinger, K. (2008). ‘R&D and Subsidies at the Firm Level: An Application of Parametric and Semiparametric Two-Step Selection Models’. Journal of Applied Econometrics. 23, pp. 729-747.
 Raymond, W., Mohnen, P., Palm, F., Van Der Loeff, S. (2010). ‘Persistence of Innovation in Dutch Manufacturing: Is It Spurious?’.The Review of Economics and Statistics. 92:3, pp. 495-504.
 Kongmanila, X., & Takahashi, Y. (2009), ‘Inter-firm cooperation and firm performance: An empirical study of the Lao garment industrycluster’ International Journal of Business and Management, 4(5), p3.
 Grazzi, M. (2012), ‘Export and Firm Performance: Evidence on Productivity and Profitability of Italian Companies. Journal of Industry, Competition and Trade’, 12(4), 413–444. http://dx.doi.org/10.1007/s10842-011-0102-9
 Kumar, N. and Pradhan, J.P.2003. “Export Competitiveness in the Knowledge-based Industries: A Firm-level Analysis of Indian Manufacturing.”RIS Discussion Paper.No. RIS-DP43/2003. RIS, New Delhi
 Aggarwal, A. (2002), ‘Liberalisation, Multinational Enterprises and Export Performance: Evidence from Indian Manufacturing’, The Journal of Development Studies, 38:3, 119-137, DOI: 10.1080/00220380412331322371.
 McDonald, J. T. (1999). The determinants of firm profitability in Australian manufacturing. Economic Record, 75(2), 115-126
 Feeny, S. (2000), ‘Determinants of profitability: an empirical investigation using Australian tax entities’,Melbourne Institute of Applied Economic and Social Research.
 Lall, S. (1986), ‘Technological development and export performance in LDCs: Leading engineering and chemical firms in India’. Weltwirtschaftliches Archiv,122(1), 80-92.
 Glen, J., Lee, K., & Singh, A. (2001), ‘Persistence of profitability and competition in emerging markets’. Economics Letters, 72(2), 247-253.
 Kambhampati, U. S., & Parikh, A. (2003), ‘Disciplining firms: the impact of trade reforms on profit margins in Indian industry’, Applied Economics, 35(4), 461-470.
 Abreu, M., and Mendes, V. (2001), ‘Commercial bank interest margins and profitability: evidence for some EU countries’. In Pan-European Conference Jointly Organised by the IEFS-UK & University of Macedonia Economic & Social Sciences, Thessaloniki, Greece, May (pp. 17-20).
 Molyneux, P., & Thornton, J. (1992), ‘Determinants of European Bank Profitability: A Note’, Journal of Banking &Finance, 16(6), 1173-1178.
 Athanasoglou, P. P., Brissimis, S. N., & Delis, M. D. (2008), ‘Bank-specific, industry-specific and macroeconomic determinants of bank profitability’, Journal of international financial Markets, Institutions and Money, 18(2), 121-136.
 Said, R. M., &Tumin, M. H. (2011), ‘Performance and financial ratios of commercial banks in Malaysia and China’, International Review of Business Research Papers, 7(2), 157-169.
 Majumdar, S. K. (1997), ‘The impact of size and age on firm-level performance: some evidence from India’, Review of industrial organization, 12(2), 231-241.
 Comanor, W. S., & Wilson, T. A. (1972), ‘Advertising market structure and performance’, J. Reprints Antitrust L. & Econ., 4, 25.
 Shepherd W.G. (1972), ‘The Elements of Market Structure, Review of Economics and Statistics, Vol. 54, No. 1. (Feb., 1972), pp. 25-37.
 Jayadev, A.andStiglitz, J. E.(2009), ‘Two ideas to increase innovation and reduce pharmaceutical costs and prices. Health Affairs, 28 (1) pp165-168.
 Hall, M., & Weiss, L. (1967), ‘Firm size and profitability’, The Review of Economics and Statistics, 49(3), pp.319-331.
 Gale B.T. (1972), Market Share and Rate of Return, Review of Economics and Statistics, 54: 412-423.
 Buzzell, R. D., Gale, B. T., & Sultan, R. G. (1975).Market share-a key to profitability. Harvard Business Review, 53(1), 97-106.
 Nakao, T. (1993). Market share, advertising, R&D, and profitability: An empirical analysis of leading industrial firms in Japan. Review of Industrial Organization, 8(3), 315-328.
 Szymanski, D. M., Bharadwaj, S. G., and Varadarajan, P. R. (1993), ‘An analysis of the market share-profitability relationship’. The Journal of Marketing, 1-18.
 Mukhopadhyaya, J. N., Roy, M., and Raychudhuri, A. (2012), ‘Determinants of Market Share, Profitability and Market Power at the Firm Level in the Cement Industry of India’. Vilakshan: The XIMB Journal of Management, 9(1).
 Chu, W., Chen, C. N., & Wang, C. H. (2008), ‘The market share–profitability relationships in the securities industry’, The Service Industries Journal, 28(6), 813-826.
 Beleska-Spasova, E., Glaister, K. W., and Stride, C. (2012), ‘Resource determinants of strategy and performance: The case of British exporters’, Journal of World Business, 47(4), 635-647.
 Vogel, A., & Wagner, J. (2011), ‘Robust estimates of exporter productivity premia in German business services enterprises’, Economic and Business Review, 13(1-2), 7-26.
 Wagner, J. (2012). Exports, imports and profitability: First evidence for manufacturing enterprises. Open Economies Review, 23(5), 747-765.
 Vu, H., Holmes, M., Lim, S., & Tran, T. (2014), ‘Exports and profitability: a note from quantile regression approach’, Applied Economics Letters, 21(6), 442-445.
 Demir, F. (2013), ‘Growth under exchange rate volatility: Does access to foreign or domestic equity markets matter?’. Journal of Development Economics, 100(1), 74-88.