Determinants of pharmaceutical innovation: the role of technological opportunities revisited
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Recent empirical contributions emphasize the importance of (potential) market size for the development of new pharmaceuticals. At the same time, many scholars point out the importance of scientific advances for the industry’s R&D activities. Against this background I analyze the relationship between (potential) market size, technological opportunities, and the number of new pharmaceuticals in the United States. Technological opportunities are operationalized as growth rates of the relevant knowledge stock, as proposed by Andersen (Struct Chang Econ Dyn 9(1):5–34 1998, J Evol Econ 9(4):487–526 1999). I analyze a unique dataset by using an “entry stock” Poisson quasi-maximum likelihood estimator. The results reveal a rather robust and significantly positive response of the number of new pharmaceuticals, i.e., new molecular entities or new drug approvals, to market size and technological opportunities.
KeywordsDeterminants of innovation Pharmaceuticals Demand Technological opportunities
JEL ClassificationO31 J10 J20 L65
I am grateful to the German Research Foundation (DFG) for financial support (DFG GKR 1411). I thank Uwe Cantner, Matthew J. Higgins, Ivan Savin, Simon Wiederhold, the participants of the Research Seminar at the Institute for Innovation and Entrepreneurship in Gothenburg, Sweden on February the 3rd 2012, the participants of the DRUID Society Conference 2012 in Copenhagen, Denmark, the participants of the 14th ISS Conference in Brisbane, Australia, the participants of the Annual Congress of the Verein für Socialpolitik 2012 in Göttingen, Germany and two anonymous reviewers for useful comments, expressed interest and concerns. The usual caveats apply.
Compliance with Ethical Standards
Conflict of interests
The author declares that he has no conflict of interest.
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