Abstract
We explore the impact of research and development (R&D) on sales growth rate with firm-specific factors under the Korean pharmaceutical industry structure using listed Korea pharmaceutical company data from 2007 to 2018 with the quantile regression technique. We find that R&D intensity has a positive effect on firm growth rate while R&D scale a negative effect on the firm growth rate at the upper quantile, whereas the result is opposite at the lower quantile. Firm size has a mixed relationship with sales growth at the upper quantile, thus Gibrat’s law is rejected in the Korean pharmaceutical industry. Firm age has a negative relationship with the sales growth rate at the upper quantile, which shows the consistent result with previous research that young firms grow faster. Patent persistence has a negative relationship with sales growth at the upper quantile, while a positive effect at the lower quantile. We show that young firms and firms with high R&D intensity contribute to the high growth rate, while the relationship is not clear at the lower quantile. Therefore, policy implication in this research is that the government should pay attention to encouraging and supporting R&D investment activities and small firms as well as consider ways to enhance patent rights.
Highlights
Firm growth studies have been one of the central topics among many researchers [1]
research and development (R&D) intensity was calculated with R&D expenditure divided by one-period lag firm size and by one period lag asset, respectively, and those two combined into a single composite index using principal component analysis (PCA) to avoid potential bias focusing on any individual calculation method
We empirically investigated how the firm growth rate is influenced by firm-specific factors under the Korean industry structure using quantile regression in comparing with the OLS regression results
Summary
Firm growth studies have been one of the central topics among many researchers [1]. Firm growth rates show heterogeneity across firms and are very hard to predict. Empirical studies have shown mixed results on the impact of innovation on firm growth. The pharmaceutical industry provides an excellent opportunity to study the long-term dynamics of the industry where R&D and innovation play an essential role in the performance of the firms [9], we researched the relationship between innovative activities and high growth firms under the pharmaceutical industry structure. Since the industry structure could provide a clue, though not to causality, to understand better the relationship between high growth firms and innovation [9], we looked into the competition and concentration in the Korean pharmaceutical industry. We find the relationship between R&D and growth for high growth and low growth firms in the Korean pharmaceutical industry using quantile regression techniques considering both firm-specific and industry-specific factors.
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
