Scale, Scope, and Spillovers: The Determinants of Research Productivity in Drug Discovery

We examine the relationship between firm size and research productivity in the pharmaceutical industry. Using detailed internal firm data, we find that larger research efforts are more productive, not only because they enjoy economies of scale, but also because they realize economies of scope by sus...

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Bibliographic Details
Published in:The Rand journal of economics 1996, Vol.27 (1), p.32-59
Main Authors: Henderson, Rebecca, Cockburn, Iain
Format: Article
Language:English
Subjects:
Author productivity
Coefficients
Drug Industry - economics
Economic models
Economic research
Economies of scale
Economies of scope
Efficiency
Health technology assessment
Humans
Industrial research
Innovation
Medical treatment
Models, Econometric
Observational research
Pharmaceutical industry
Pharmaceutical preparations
Productivity
Public policy
Regression analysis
Research - statistics & numerical data
Research and development
Studies
Citations: Items that cite this one
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Summary:We examine the relationship between firm size and research productivity in the pharmaceutical industry. Using detailed internal firm data, we find that larger research efforts are more productive, not only because they enjoy economies of scale, but also because they realize economies of scope by sustaining diverse portfolios of research projects that capture internal and external knowledge spillovers. In pharmaceuticals, economies of scope in research are important in shaping the boundaries of the firm, and it may be worth tolerating the static efficiency loss attributable to the market power of large firms in exchange for their superior innovative performance.
ISSN:0741-6261
1756-2171
DOI:10.2307/2555791