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The Sources of Heterogeneity in the Efficiency of Indian Pharmaceutical Firms

In: Performance of Pharmaceutical Companies in India

Author

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  • Mainak Mazumdar

    (Centre De Sciences Humaines (CSH))

Abstract

Using the non parametric approach of Data Envelopment Analysis (DEA) this chapter examines firm’s heterogeneity in the Indian pharmaceutical industry by measuring their input and output efficiencies. The analysis establishes that even though firms have been able to make efficient use of inputs like labor and raw material, the output efficiency reveals a declining trend. The phenomenon can be attributed to differences in the size of firms and the presence of economies of scale in production. Further analysis reveals the importance of firm specific factors like its strategies and structure for variation in output efficiency. We find that firms that are vertically integrated with down-stream raw-material industry are more efficient. We also find that R&D is a possible strategic option for only the larger sized firms to gain higher efficiency.

Suggested Citation

  • Mainak Mazumdar, 2013. "The Sources of Heterogeneity in the Efficiency of Indian Pharmaceutical Firms," Contributions to Economics, in: Performance of Pharmaceutical Companies in India, edition 127, chapter 0, pages 45-71, Springer.
    • Handle: RePEc:spr:conchp:978-3-7908-2876-4_3
    DOI: 10.1007/978-3-7908-2876-4_3
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