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Firm-level productivity and its determinants in the Indian pharmaceutical industry

Author

Listed:
  • Subhrabaran Das

    (Tripura University (A Central University))

  • Ariful Hoque

    (Tripura University (A Central University))

Abstract

This study attempts to examine the total factor productivity (TFP) of Indian pharmaceutical industry across different sizes of firms, and to identify the factors responsible for TFP variation. The study uses secondary data accessed from the Prowess IQ database for the period from 1995–1996 to 2019–2020, and employs parametric approach based on the estimation of the Cobb–Douglas production function to measure productivity. The analysis reveals that the overall productivity of Indian pharmaceutical firms has increased during the post-patent years. Comparison of TFP across different sizes of firms reveals that in both the pre-and post-patent periods, large firms exhibit higher productivity than their medium and smaller counterparts. Estimation of TFP growth shows that during the pre-patent period, all firms, irrespective of their sizes, have recorded negative growth rates. However, a positive turnaround is observed in the growth rates of all firms during the post-patent years. Econometric exercise shows that industrial concentration, age of the firm, firm-size, capital intensity, R&D intensity, export intensity, imported raw materials intensity, and profit intensity are the important variables exercising a significant influence on firm productivity, though their direction and strength of influence differ.

Suggested Citation

  • Subhrabaran Das & Ariful Hoque, 2023. "Firm-level productivity and its determinants in the Indian pharmaceutical industry," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 50(4), pages 439-459, December.
    • Handle: RePEc:spr:decisn:v:50:y:2023:i:4:d:10.1007_s40622-023-00369-6
    DOI: 10.1007/s40622-023-00369-6
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    More about this item

    Keywords

    Pharmaceutical industry; Total factor productivity; Product patent; R&D intensity; Industrial concentration; X-inefficiency;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics

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