The determinants of pharmaceutical research and development expenditures

Henry Grabowski

John Vernon

pp. 207-221

in: Dennis C. Mueller, UWE Cantner (eds), Capitalism and democracy in the 21st century, Heidelberg, Physica, 2001

Abstract

Since the late 1970s, pharmaceutical R&D has grown at a rapid rate relative to sales and other variables. In this paper, we examine the determinants of pharmaceutical R&D using a pooled data sample of 11 major drug firms over the period 1974 to 1994. We find that expected returns and cash flows are important explanatory variables of firm research intensities during this period. This is consistent with our results for an earlier sample period characterized by very different growth patterns on R&D.