Firm Growth Dynamics Under Different Knowledge Regimes: the case of the pharmaceutical industry

Mariana Mazzucato and Pelin Demirel

No 63, Open Discussion Papers in Economics from The Open University, Faculty of Social Sciences, Department of Economics

Abstract: The paper studies the dynamics of firm growth and firm size distributions in the pharmaceutical industry from 1950 to 2003 and in the biotechnology industry from the early 1980's to 2003. Growth dynamics are studied in the context of how the size composition of firms changes, how innovation patterns (patents) change, as well as locational decisions of firms (NJ vs. California). Results suggest that Gibrat's law (random growth) does not hold for the majority of the period under observation, and that the growth advantage of small pharma firms increases after the 1980's as the process of innovation becomes more 'guided' and scale intensive and as small firm innovation becomes more 'persistent'. Furthermore, at the end of the 1970's a 'bimodal' firm size distribution emerges in the pharmaceutical industry precisely when a new division of labor between large and small firms sets in. We find that firms located in California are smaller, faster growing and more innovative than those in NJ.

Keywords: firm growth; innovation; industry dynamics; pharmaceutical (search for similar items in EconPapers)
Pages: 37 pages
Date: 2007-09
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Persistent link: https://EconPapers.repec.org/RePEc:opn:wpaper:63

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