R&D Productivity in the Japanese Pharmaceutical Industry Economies of Scale, Economies of Scope, and Spillover Effects
Yosuke Okada (Chief Researcher, Institute of Pharmaceutical Industry Policy, Graduate School of Economics, Hitotsubashi University)
Akihiro Kawahara (Senior Researcher, Pharmaceutical Industrial Policy Institute)
(No. 9: Published in February 2002)
This paper examines the relationship between firm size and R&D productivity in the drug discovery process of ten major Japanese pharmaceutical manufacturers, using detailed patent data by therapeutic area. R&D productivity is estimated based on the number of patents granted, weighted by the number of citations. According to this study, the productivity of drug discovery research from the 1980s to the mid-1990s cannot be fully explained by mere economies of firm size. Rather, it was strongly defined by the nature of the portfolio, including the number, composition, and weight of research projects. In particular, it is empirically confirmed that economies of scope and spillover effects of knowledge inside and outside the firm strongly define the advantage of firm size.