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Patents and performance in the Japanese pharmaceutical industry: An institution-based view

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Abstract

In this paper we analyze the strategic response of Japanese pharmaceutical firms to increased competitive pressure. During the 1980’s and 1990’s entry barriers were lifted and markets deregulated. As a consequence transaction structures moved from a relationship based mode towards a market based mode where competition is based on research excellence and new and innovative products. Using panel data of a sample of Japanese pharmaceutical companies, this paper discusses the effect of international patents as an indicator of research capabilities on subsequent corporate performance measured as profits on total assets. Our empirical result suggests that a firm’s patent stock is unrelated or even negatively correlated to its profitability.

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Notes

  1. Other sources estimates are even higher. Bain & Co. estimates that the average cost per successful drug launch is $1.7 billion. And a 2003 report by the US Department of Commerce found that every $1.3 billion invested in R&D should, on average, yield one new medicine in the marketplace.

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Correspondence to Jörg C. Mahlich.

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The author wants to thank the editor and the referees for helpful comments.

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Mahlich, J.C. Patents and performance in the Japanese pharmaceutical industry: An institution-based view. Asia Pac J Manag 27, 99–113 (2010). https://doi.org/10.1007/s10490-008-9128-x

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