The factors affecting firms' growth: investment in tangible versus intangible assets in the Greek pharmaceutical industry

Abstract

The present paper examines the factors that result in firms' good performance with a focus on the pharmaceutical industry, which constitutes an important part of the economy. An econometric analysis revealed that the investment in intangible assets (mainly in innovative activity) contributes more to the gross sales and employment growth than the investment in tangible assets. Furthermore, through the segregation of the innovative process to in-house Research and Development (R&D), production in third-party facilities and the acquisition of intellectual property rights, we found that only the former seems to have a positive effect on firm growth. Real innovative activity appears to be a critical issue in the survival and success of the pharmaceutical firms as opposed to the other kinds of investment or ownership status (subsidiary versus domestic). The results strongly indicate that firms in the sector (especially those that are independent) should focus on in-house innovative activity as a central issue of future strategies.