Endogeneity in pharmaceutical knowledge generation: An instrument‐free copula approach for Poisson frontier models

Rouven E. Haschka and Helmut Herwartz

Journal of Economics & Management Strategy, 2022, vol. 31, issue 4, 942-960

Abstract: This study provides an assessment of the R&D–patent relation of European pharmaceutical firms that are not flawed by endogeneity biases. Firms invest in R&D and generate latent knowledge which then manifests in observable patent outcomes through a Poisson model. The process of turning R&D into knowledge is described by a production process subject to inefficiency and endogeneity. To estimate a Poisson stochastic frontier model, the suggested novel copula‐based approach directly accounts for the dependence between the endogenous regressors and the inefficiency component. Hence, its implementation does not require any instrumental variables. Simulation results underline that the proposed estimator outperforms conventional instrumental variable estimators. Neglecting endogeneity leads to a substantial underestimation of the R&D elasticity of patents generated in the European pharmaceutical industry.

Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://doi.org/10.1111/jems.12491

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jemstr:v:31:y:2022:i:4:p:942-960

Ordering information: This journal article can be ordered from
http://www.blackwell ... ref=1058-6407&site=1

Access Statistics for this article

More articles in Journal of Economics & Management Strategy from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().