Indian Pharmaceutical Firms Research Articles

Competitive Advantage in the New Patent Regime: A Study of the Indian Pharmaceutical Industry

The introduction of product patent regime in 2005 forced the firms in the Indian Pharmaceutical Industry (IPI) to rethink their sources of competitive advantage. The absence of an appropriate funding mechanism through the Indian government and the acquisition of Indian pharmaceutical firms by MNCs have added to the woes. This study mainly focuses on how firms in the IPI would respond in such a scenario.

Perception of the Indian pharmaceutical firms towards stronger product patent regime: a case study of North West region

India, being a signatory member of WTO, adopted product patents laws in 1995. Prior to that Indian pharmaceutical industry was being governed by the Indian Patent Act of 1970, which allowed only process patent laws. What are the effects of stronger patent laws on the Indian pharmaceutical firms? What is the perception of the Indian pharmaceutical firms towards stronger product patent regime? Whether they treat it as an opportunity or they perceive it as a threat. These are some of the issues the present paper tries to answer. With a sample of 100 firms, the study tries to cover the major areas in Northern India which has a combination of excise free zone and non-excise free zone. The overall reliability of the questionnaire has been .798. Statistical tools like chi-square tests and ANOVA are used to test the hypothesis. The results of the study highlight an improvement in the perception of Indian firms. They are ready for the challenges offered by the post-TRIPS era and are accepting the new opportunities offered by it.

Location choice and the internationalization sequence

PurposeThe purpose of this paper is to contribute to the literature on emerging multinationals by studying the internationalization strategies of two established companies in the Indian pharmaceutical industry: Ranbaxy and Wockhardt.Design/methodology/approachThe study utilizes a longitudinal case‐study approach to capture Ranbaxy's and Wockhardt's dynamic internationalization patterns. An extensive literature review using recently published works, government documents, and organizational reports was employed to give a clearer description of the two case companies.FindingsThe internationalization patterns of Ranbaxy and Wockhardt suggest that the mainstream internationalization models are more effective in explaining exploitative learning in terms of utilizing the firm's existing knowledge stock in the early stages of internationalization, while the emerging internationalization models (e.g. the LLL framework and accelerated internationalization) are more effective in explaining exploratory learning in terms of seeking novel knowledge flows in firms' later stages of internationalization.Research limitations/implicationsThe empirical base is limited and the use of case studies has its shortcomings (e.g. in terms of sample size, generalizations, etc.). As such, the exploratory findings of this study must be further verified and extended at other sites, especially to firms operating in regulated industries in other emerging countries. Second, the author analyzed the decision to enter a foreign market, without studying subsequent performance and its effects on further entries. The accelerated international growth may have negative consequences for the two cases, as time compression diseconomies may emerge when the firm has a fast foreign expansion pace. Further research using data from other industries and countries, and taking into account entry mode and performance could shed more light into this controversial issue. Third, the author only compared an early‐mover and a latecomer in the comparative case analysis. One of critical topics for further study is to compare different three types of MNEs, e.g. latecomer, newcomer and early‐mover, from the same industry to understand how their geography of learning and knowledge acquisition are influenced by their internationalization and locational choices.Practical implicationsOverseas acquisition, as compared to greenfield investment (e.g. wholly owned subsidiaries), offers more benefits to Indian pharmaceutical firms. Overseas acquisition provides access to established marketing networks, augments Indian firms' ownership advantages with new products and other firm‐specific intangible assets and, offers economic gains from improved operational synergies.Originality/valueThe paper is one of the few which has dealt with an important aspect of firm internationalization, i.e. country selection, the sequence of internationalization across foreign markets and their modes of integration.

Stock Futures Trading Information and Spot Price Volatility: Evidence from the Indian Pharmaceutical Sector

Exponential GARCH model was employed to examine the impact of futures trading on spot market volatility of the twelve underlying shares of pharmaceutical sector of India. The empirical analysis was conducted for the daily closing price returns of each stock of pharmaceutical firms for the different time periods from 1st January, 1996 through 12th March, 2009. The analysis reveals mixed findings. Most of the selected pharmaceutical stocks reveal an introduction of futures market declined the volatility of underlying spot market. This is followed by positive impact of introduction of futures on the spot market volatility of the selected underlying shares of pharmaceutical firms in India. Besides, the empirical findings of most of the selected pharmaceutical scrips indicate the existence of positive asymmetric response to new information on the volatility of underlying spot market.

Strategic Asset-seeking Activities of Emerging Multinationals: Perspectives of Foreign Acquisitions by Indian Pharmaceutical MNEs

While in general, studies on foreign acquisitions by emerging multinationals (EMNEs) have predicted these acquisitions to be driven by both market-seeking and strategic resource-seeking motivations, more concrete analyses on this topic are limited. This paper contributes to the existing literature by analyzing the overseas acquisition activities of EMNEs from Indian pharmaceutical sector. Using the general framework of technological change in emerging economies, Indian pharmaceutical firms are identified to have delicate weakness in their product development capabilities to face intensifying competition in the globalized policy regime. It makes sense for these firms to internationalize through acquisitions of foreign assets that help them not only access new markets but also new products and technologies to overcome their limited product development competencies. The empirical findings highlight the role of host market size, intensity of patenting, skill and liberal FDI policy regime as the key determinants of the geographical distributions of Indian pharmaceutical acquisitions. This implies that EMNEs from Indian pharmaceutical industry are using acquisition as a mixed strategy of accessing markets as well as strategic assets/resources.

Corporate Ownership and the Technical and Scale Efficiency of Pharmaceutical Firms in India - Empirical Evidence

Corporate Ownership and the Technical and Scale Efficiency of Pharmaceutical Firms in India - Empirical EvidenceIn the existing literature, the theoretical models suggest that foreign-owned firms perform better than domestic firms and that private sector firms perform better than public sector firms. The present study is a modest attempt in this regard to empirically test and compare the differences in the technical and scale efficiencies of 36 public limited companies, private sector firms and foreign firms belonging to the pharmaceutical industry of India using the DEA model. The analysis shows that overall technical efficiency was different in the case of private domestic and public sector firms in the year 1990, i.e., the pre-reform period. The difference was also significant in the case of private foreign and public sector firms, though it was not significant in the case of private domestic and private foreign firms in the pre-reform period. However, in the subsequent post-reform years, there were no significant differences.

R&D Efforts by Indian Pharmaceutical Firms in the New Patent Regime

R&D Efforts by Indian Pharmaceutical Firms in the New Patent RegimeIn the context of recent amendments to the Indian Patent Act and introduction of the product patent, the present paper attempts to examine the innovative efforts of Indian pharmaceutical companies in the new patent regime. The paper finds that although R&D expenditure has increased significantly in the current decade, the increasing R&D efforts are not widespread across the firms and more than half of the Indian pharmaceutical companies do not spend at all on in-house R&D. This means that protection of intellectual property alone is not enough to encourage the firms towards innovation. Instead, it is observed that R&D expenditure varies directly the with market size of the firms, their capital intensity, exports orientation and past profitability, but inversely with their market share, selling efforts and import intensity. However, a firm's involvement in mergers and acquisition or sourcing of technology from foreign sources or variability in financial performance does not have any significant impact on its R&D efforts. Hence, the policy measures should be directed towards restricting the monopoly power of firms, encouraging exports, liberalizing imports of necessary machinery and equipment, and motivating the firms towards innovation, especially in life-saving drugs, an through appropriate incentive/disincentive structure.

Indian pharmaceuticals in Brazil: emerging multinationals in emerging markets

PurposeThis paper fills a gap in burgeoning emerging country multinational company (EMNC) literatures by offering a region‐wide picture of changes occurring across one sector: pharmaceuticals. The purpose of this paper is to analyze the entry of Indian firms in the Latin American pharmaceutical market since the late 1990s.Design/methodology/approachThe analysis builds on a multi‐method approach. Over 80 interviews with firm managers, policy makers and regulators are informed by a national database showing the relative importance of Indian exports in generics, similares (branded generics), public, and bulk chemical markets.FindingsThe paper's findings are twofold: first, contrary to popular intuition regarding developing EMNC activity – which suggests that firms from the developing world have competitive advantages in other developing countries – Indian pharmaceutical firms have learned that operating in a weak institutional environment does not confer specific market advantages. Second, Indian EMNCs have assumed both symbiotic and antagonistic roles, simultaneously cooperating and competing with local firms.Research limitations/implicationsThe data are drawn from one industry, across one regional market. Future research could extend the approach, to investigate the southern‐directed strategies of EMNCs in other industries.Practical implicationsThe findings of this paper suggest that EMNC managers should not rely on advantages typically described in EMNC literatures. The paper also suggests that public health and regulatory policy in Latin America should take into account the diversification of inputs and strength of Asian bulk chemical suppliers.Originality/valueThis paper enriches current EMNC literatures in which there is a dearth of research on EMNC approaches in emerging markets.

The Distinctive Patterns of Dynamic Learning and Inter‐firm Differences in the Indian Pharmaceutical Industry

Technological or institutional change has proven to be a major cause of the failure of established firms, and history is full of examples. In a globalized world the capability of a firm to reconfigure existing competencies and create new knowledge for innovation has emerged as a dynamic capability to succeed. I examine the learning processes involved in the development of innovative R&D capabilities in Indian pharmaceutical firms as a response to the strengthening of patent law. The strong patent law represented a major institutional change for Indian firms which had grown in a weak patent era. The analysis shows that the development of new capabilities involved the removal of rigidities and the acquisition of new knowledge, and reveals that Indian firms are adopting strategies such as hiring of Indian scientists educated or working overseas in pharmaceutical R&D and collaborative R&D to acquire innovative R&D capabilities. It further points out the inter–intra firm heterogeneity in learning processes and suggests that the move from basic to advance level capabilities is neither linear nor automatic. It requires a deliberate effort and investment by firms in different mechanisms of learning. The Indian pharmaceutical firms' responses provide important insights for firms from other developing countries.

Comparing the Efficiency of the Indian Pharmaceutical Firms

Comparing the Efficiency of the Indian Pharmaceutical Firms

Overcoming Innovation Limits Through Outward FDI: The Overseas Acquisition Strategy of Indian Pharmaceutical Firms

A host of strategic government policies including a process patent regime led to the rise of Indian pharmaceutical firms with significant process development capabilities. With policies getting liberalized overtime and a product patent regime in place, now firms’ survival crucially depends on their abilities to develop new products and brand creating exercise. Indian pharmaceutical firms with their inadequate product development capabilities are clearly at serious risk. In this context, an increasing number of Indian pharmaceutical firms are observed to be using acquisition as a strategy to overcome their limited innovation strength by accessing new products and their technologies, skills and new markets. Overseas acquisitions represent both challenges and opportunities for Indian pharmaceutical firms aspiring to emerge as global entities based on advance technologies.

New Policy Regime and Small Pharmaceutical Firms in India

Small firms dominate the Indian pharmaceutical industry with significant contribution to the national drug production and employment. They had played an important role in enhancing domestic technological capabilities in drugs production and have been instrumental in keeping drugs prices affordable for the Indian populace in remote rural areas. This rise of small firms in this sector has been facilitated by a set of strategic government polices implemented in the past decades like adoption of a process patent regime, relaxation granted from price control and industrial licensing requirement, reservation of items for exclusive production and preference in government procurement, etc. Since 1990s the regulatory regime for small firms underwent dramatic changes with withdrawal of most of the favoruable policies and implementation of regulations like a long‐term product patent regime, withdrawal of exemption from price controls, implementation of good manufacturing practices, etc. These new policies have a number of implications for the survival and growth of small pharmaceutical firms today.

Overseas Acquisition Versus Greenfield Foreign Investment Which Internationalization Strategy is Better for Indian Pharmaceutical Enterprises?

Very recently overseas acquisition and outward greenfield foreign investment have emerged as the two important modes of internationalization of the Indian pharmaceutical enterprises. This study examines the relative strengths and weaknesses of these strategies so as to suggest which between the two is a more effective internationalization strategy for the Indian pharmaceutical firms, given the nature of their ownership advantages. This analysis has been conducted in three stages. First, the nternationalization process of the Indian pharmaceutical industry has been embedded into a four stage theory emphasizing on the emergence of different modes of internationalization like inward foreign investment, imports, exports, outward greenfield investment, overseas acquisition and contract manufacturing including inter-firm strategic alliances. Second, theoretical perspectives have been developed with regard to the different ways in which greenfield investment and overseas acquisition can maximize the revenue productivity of pharmaceutical firms’ competitive advantages and/or to strengthen their competitive position. Third, case study of Ranbaxy Laboratories has been undertaken to empirically assess its experience with overseas acquisitions. The analysis indicates that the growth and internationalization of Indian pharmaceutical enterprises was critically dependent upon strategic government policies pursued in the past. The Indian experience offers a number of policy lessons to other developing countries wanting to build their domestic base in the pharmaceutical sector. Theoretical understandings indicate that acquisition is a more effective internationalization strategy than greenfield investment since the former not only provides all the benefits that the latter gives, but also several other competitive advantages important for firms’ performance in world market. The experience of Ranbaxy shows that overseas acquisitions have augmented its intangible asset bundle including distribution and market networks and have provided access to an existing market.

Global Competitiveness of Indian Pharmaceutical Industry: Trends and Strategies

What are the trends in the global competitiveness of the Indian pharmaceutical industry? Where does this industry stand when compared to global peers on pharmaceutical value-added, productivity, research and development and trade performance? What are the new strategies that Indian pharmaceutical companies are adopting to become global players? These questions are addressed in this paper. It is found that strategic government policies were the main factors that transformed the status of the Indian pharmaceutical industry from a mere importer and distributor of drugs and pharmaceuticals to an innovation-driven cost-effective producer of quality drugs. India emerged as one of the fast growing pharmaceutical industry in the world with growing trade surpluses and exports. However, there are certain limitations that the government policies need to address, like low productivity and R&D intensity. A host of competitive strategies, like greenfield direct investment, overseas acquisitions, strategic alliances and contract manufacturing have emerged as favourites to Indian pharmaceutical firms recently.

International migration, knowledge diffusion and innovation capacities in the Indian pharmaceutical industry

Evidence suggests that a ‘reverse brain drain’ of engineers and scientists trained in the USA or Europe can accelerate technological upgrading in knowledge‐based firms in emerging countries. This study, through case studies of four innovative Indian pharmaceutical firms, considers Human Resource Management strategies adopted by firms in a developing country to attract and retain their scientific workforce.

The Role of HR in Cross‐Border Mergers and Acquisitions: The Case of Indian Pharmaceutical Firms

Mergers and acquisitions (M&) are increasingly becoming a strategy of choice for companies attempting to achieve and sustain competitive advantage. However, not all M&As are a success. In this paper, we examine the three main reasons highlighted in the literature as major causes of M&A failure (clashing corporate cultures, absence of clear communication, and employee involvement) in three Indian pharmaceutical companies, and we analyze the role played by the HR function in addressing them. Also, we discuss the importance of gaining the commitment and focus of the workforce during the acquisition process through employee involvement.

Experimentation with strategy and the evolution of dynamic capability in the Indian pharmaceutical sector

This article demonstrates that radical regulatory changes can be tantamount to technological revolutions by studying Indian pharmaceutical firms. It shows that radical regulatory changes such as the Indian Patent Act of 1970, the New Industrial Policy of 1991 and the signing of TRIPS (Trade Related Intellectual Property Rights System) in 1995 served to open up new economic opportunities and constraints in the wake of which the winners and losers were selected as a function of the dynamic firm capabilities most appropriate for the new market environment.

Product Cycles, Innovation, and Exports: A Study of Indian Pharmaceuticals

Summary This paper studies the product cycle and neo-technology theories of trade in the context of generic pharmaceuticals. It analyzes the export performance of 131 Indian pharmaceutical firms for the period 1989–2004. The results indicate that technology proxied by foreign patent rights has a positive impact on exports. This suggests that developing countries with innovation skills for process innovations are capable of penetrating international markets in the later stages of the product cycle by using patents, which were the barriers to trade in the early stages of the product cycle.

Internationalization and technological leapfrogging in the pharmaceutical industry

The pre-refereed author version of this article was published as a UNI-MERIT Working Paper under the title “Internationalising to create Firm Specific Advantages: Leapfrogging strategies of U.S. Pharmaceutical firms in the 1930s and 1940s & Indian Pharmaceutical firms in the 1990s and 2000s”. The paper can be downloaded from the UNU-MERIT website from the following link: http://arno.unimaas.nl/show.cgi?fid=12607.

Third-World Copycats to Emerging Multinationals: Institutional Changes and Organizational Transformation in the Indian Pharmaceutical Industry

This article investigates how Indian pharmaceutical firms, facing discontinuous institutional changes in their domestic environment due to economic liberalization and intellectual property reforms, have undertaken organizational transformation. Internationalization of resources and product markets constitutes an important component of organizational transformation for local firms in emerging economies. Using longitudinal data on 206 Indian pharmaceutical firms from 1995–2004, we find that firms' access to international technological and financial resources enables product market internationalization. Furthermore, we theorize and find support for our predictions that the association between international resources and markets is conditioned by time and business group affiliation, and product market internationalization affects financial performance. Several implications thus emerge for theory and practice associated with the sources of competitiveness in emerging economy firms and their transformation into globally competitive multinational firms.