Can R&D Input Influence Market Power? Facts about China's Pharmaceutical Manufacturing Industry

Ruoya Wang and Yaodong Zhou

Journal of Institutional and Theoretical Economics (JITE), 2021, vol. 177, issue 4, 428-448

Abstract: In the pharmaceutical manufacturing industry, R&D activities play an important role in market competition. This study improves upon Klette's method based on the framework of the New Empirical Industrial Organization (NEIO) and incorporates enterprise-level R&D input as a separate input index, to verify the influence of R&D on market power. Adopting data from the China Stock Market & Accounting Research (CSMAR) database and the National Bureau of Statistics of China, the generalized method of moments (GMM) is applied. Our findings demonstrate that there is insufficient market power, as well as diseconomies of scale, in China's pharmaceutical manufacturing industry. Measuring R&D spending separately renders our estimates more accurate.

Keywords: enterprise-level data; economies of scale; market concentration; NEIO; R&D (search for similar items in EconPapers)
JEL-codes: L13 L16 L20 L65 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1628/jite-2021-0015

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