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Technological races and stock market value: evidence from the pharmaceutical industry

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  • Sandy Campart
  • Etienne Pfister

Abstract

We provide estimates of the abnormal stock market returns associated with pharmaceutical firms' announcements of technological and regulatory successes in drug development. On the basis of these estimates, we find empirical support for two key features of technological race models. First, we observe that leaders in the innovation race record higher abnormal returns than do latecomers when they announce a success. Hence, firms should indeed be racing to complete the innovation process before their rivals. Second, pharmaceutical firms are adversely affected by the technological and regulatory success of their rivals, implying that interfirm spillovers in drug development are not sufficient to offset technological rivalry. Additional results are also produced regarding the impact of competition on R&D racing and the extent of therapeutic competition.

Suggested Citation

  • Sandy Campart & Etienne Pfister, 2014. "Technological races and stock market value: evidence from the pharmaceutical industry," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 23(3), pages 215-238, April.
    • Handle: RePEc:taf:ecinnt:v:23:y:2014:i:3:p:215-238
    DOI: 10.1080/10438599.2013.825427
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    References listed on IDEAS

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    1. Austin, David H., 2000. "Patents, Spillovers, and Competition in Biotechnology," Discussion Papers 10808, Resources for the Future.
    2. Nicholas Bloom & Mark Schankerman & John Van Reenen, 2013. "Identifying Technology Spillovers and Product Market Rivalry," Econometrica, Econometric Society, vol. 81(4), pages 1347-1393, July.
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    Cited by:

    1. Han, The Anh & Lenaerts, Tom & Santos, Francisco C. & Pereira, Luís Moniz, 2022. "Voluntary safety commitments provide an escape from over-regulation in AI development," Technology in Society, Elsevier, vol. 68(C).

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