Start
December 8, 2023 - 3:30 pm
End
December 8, 2023 - 5:00 pm
Address
Joan Robinson Hall View mapTitle: Process innovation in Indian pharmaceutical industry: observations from an empirical study
Speaker: Dr. Chidambaran G. Iyer, Associate Professor, Centre for Development Studies
Chair: Dr. Chandril Bhattacharyya, Assistant Professor, CDS
Abstract:
This paper is based on two observations made in literature (a) India’s trade surplus in pharmaceuticals is built on exports of low-value added generic products, and (b) A major part of the R&D expenditure in Indian pharmaceutical firms is being spent on development of generics and their formulation, drug delivery mechanisms, and process R&D. Since, most of the exporting Indian firms work on very thin margins and operate at scale; one of the strategies that would be followed by these firms to face cost competition is process innovation. The aim of this paper is to empirically capture process innovation in the Indian pharmaceutical industry. Keeping in mind the firm specific nature of process innovation, we build a panel data set for three years through which we control for firm level characteristics. We construct two groups, firms that do not have registered R&D units, and firms that have registered R&D units. Our empirical strategy consists of two steps, data envelopment analysis to compute firm efficiency followed by a second step that empirically verifies the impact of factors that induce process innovation. Our contribution to the literature is two-fold; as far as our knowledge goes, this is the first paper that empirically establishes the presence of process innovation in Indian pharmaceutical industry. In addition, our results show that firms that do not have registered R&D units implement strategies that induce process innovation more than the other type of firms.