How Do Pharmaceutical Companies Overcome a Corporate Productivity Crisis? Business Diversification into Medical Devices for Growth Potential

Yoonje Euh and Daeho Lee
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Yoonje Euh: Department of Interaction Science, Sungkyunkwan University, Seoul 03063, Korea
Daeho Lee: Department of Interaction Science, Sungkyunkwan University, Seoul 03063, Korea

IJERPH, 2021, vol. 18, issue 3, 1-10

Abstract: The purpose of this study was to analyze the performance of pharmaceutical companies’ business diversification into medical devices in terms of their technical efficiency (TE) as compared to that of traditional pharmaceutical companies. For a total of 174 externally audited pharmaceutical companies engaged in the drug product business between 2008 and 2019, pharmaceutical companies were classified into two groups according to medical device business diversification. The TE of pharmaceutical companies that diversify the medical device business was lower than that of traditional pharmaceutical companies. However, in terms of the meta-technology ratio (MTR) calculated using meta-frontier analysis, pharmaceutical companies diversified into medical devices showed higher MTR than the traditional pharmaceutical company group. The results imply that the corporate performance growth potential of traditional pharmaceutical companies is lower than that of pharmaceutical companies that have diversified into the medical device business.

Keywords: pharmaceutical company; business diversification; medical device; technical efficiency; meta-frontier analysis (search for similar items in EconPapers)
JEL-codes: I I1 I3 Q Q5 (search for similar items in EconPapers)
Date: 2021
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