Technological Innovations and Market Power: A Study of Indian Pharmaceutical Industry

Abstract

Technological innovations are positively associated with firms’ market performance. This study aims to examine the impact of product and process innovation on the market power of 168 Indian pharmaceutical firms during 2000–2013. We generate product and process patent stock to capture firm-level innovation activities. Findings of this study suggest that both product and process innovation positively influence firms’ market power. Results also reveal that MNEs enjoy more market power in the Indian pharmaceutical industry. Further, this study also highlights that there is a differential impact of firms’ product group on market power. This study concludes that patenting is a positive source of firm performance in the Indian pharmaceutical industry.

Innovation in Indian Pharmaceutical Industry: Impact of Changing Regulatory Regime

“…Innovation in the pharmaceutical industry can be gauged through number of patents filed or launch of new products or processes [41][42] or even when a firm modifies its existing product or process in such a manner that it lends it a competitive edge in the industry [43][44] In this industry, firms have to allocate specialized resources for developing new drugs. New drug discovery and innovation is not possible unless the companies spend considerable resources on research and development [45][46].…”