Purpose – This paper aims to examine production linkage and technology spillovers due to the presence of foreign firms in the Indian pharmaceutical industry. Design/methodology/approach – This study employs the semi‐parametric estimation method suggested by Olley and Pakes to control for unobserved firm heterogeneity that accounts for the endogeneity of input selection with respect to productivity. Findings – The results suggest that R&D activities of foreign firms lead to positive technology spillover to local firms. However, we also found negative linkage from the activities of foreign firms. The negative linkage could be explained by the large reverse engineering activities that occur on existing drugs in the Indian pharmaceutical industry, where the enclave activities of foreign firms might be a preemptive strategy to reduce the flow of technologies to downstream local firms and to protect their firm‐specific (product) technology. Originality/value – The results provide support for strong institutional arrangements such as giving protection for Intellectual Property Rights, which might be important for attracting and creating linkages with activities of foreign firms in the host country.
Journal of Economic Studies – Emerald Publishing
Published: Aug 2, 2011
Keywords: Olley‐Pakes; Spillovers; Backward linkage; Pharmaceuticals industry; India
It’s your single place to instantly
discover and read the research
that matters to you.
Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.
All for just $49/month
Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly
Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.
Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.
Read from thousands of the leading scholarly journals from SpringerNature, Wiley-Blackwell, Oxford University Press and more.
All the latest content is available, no embargo periods.
“Hi guys, I cannot tell you how much I love this resource. Incredible. I really believe you've hit the nail on the head with this site in regards to solving the research-purchase issue.”Daniel C.
“Whoa! It’s like Spotify but for academic articles.”@Phil_Robichaud
“I must say, @deepdyve is a fabulous solution to the independent researcher's problem of #access to #information.”@deepthiw
“My last article couldn't be possible without the platform @deepdyve that makes journal papers cheaper.”@JoseServera