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Entry Decisions in the Generic Pharmaceutical Industry

Author

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  • Fiona M. Scott Morton

    (School of Management)

Abstract

Data on all generic drug entries in the period 1984-1994 are used to estimate which markets heterogeneous potential entrants will decide to enter. I find that organizational experience predicts entry. Firms tend to enter markets with supply and demand characteristics similar to the firm's existing drugs. Larger revenue markets, markets with more hospital sales, and products that treat chronic conditions attract more entry. The simultaneous nature of entry leads to an additional interpretation: specialization is profitable because of the severe risk to profits when a market is "overentered." However, I am unable to make any conclusions about the efficiency of entry decisions.

Suggested Citation

  • Fiona M. Scott Morton, 1999. "Entry Decisions in the Generic Pharmaceutical Industry," Yale School of Management Working Papers ysm119, Yale School of Management.
    • Handle: RePEc:ysm:somwrk:ysm119
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    More about this item

    JEL classification:

    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • L0 - Industrial Organization - - General

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