Technology spillover as a complement for high-level R&D intensity in the pharmaceutical industry

Abstract

The pharmaceutical industry is a typical high R&D intensive industry. This is because medical supplies are based purely on R&D. Therefore, their major tenants, the pharmaceutical industry, must be a technology-driven industry. Huge amounts of R&D resources are required for generating new products. However, these resources are generally too much of a burden for smaller pharmaceutical firms, compelling them to depend on the effective utilization of technologies and research developed by their competitors. How to best utilize these technologies depends on assimilation capacity. Firms with a well-developed assimilation capacity succeed in effectively utilizing technology spillover resulting in a very productive R&D structure. One critical issue confronting all advanced countries is how to construct a highly productive R&D structure. Pharmaceutical firms with their highly productive R&D structure based on well-developed assimilation capacities provide us with a constructive model for addressing this issue at the national level. This paper undertakes an empirical analysis of R&D activities, focusing on inter-firm technology spillover in Japan's 30 leading R&D intensive pharmaceutical firms. This analysis covers the past two decades, elucidating the sources of success in constructing a highly productive R&D structure.