Size, age, innovation, and firm growth : a quantile regression approach in the Korean pharmaceutical industry

다국어 초록 (Multilingual Abstract)

I explored the impact of research and development (R&D) on sales growth rate with firm-specific factors under the Korean pharmaceutical industry structure using listed Korea pharmaceutical company data from 2007 to 2018 with the quantile regression technique.
Firm growth is an important topic and forms the fundamentals of economic growth. It shows a complex aspect due to the heterogeneity of the firms that is different from macroeconomy level growth. The firm growth models continue to be developed further through the complement of empirical and theoretical work.
The pharmaceutical industry provides an excellent opportunity to research the dynamics of the industry where R&D and innovation play an essential role in the performance of the firms because it has unique characteristics different from other industries. It is a science-based business with high R&D intensity and uncertainty resulting from a long period of development and huge investment to develop new drugs. So protection of intellectual property rights is more important than any other industry. The government policy has a conflicting direction of regulations based on information asymmetry between consumer and producer and boosting the industry as one of the future growth engines of the economy.
Recently many researchers have shown attention to high growth firms due to its economic and policy importance and quantile regression has been used to show the relationship in more detail in the heterogeneity of firm growth. Thus I researched the relationship between innovative activities and high growth firms under the pharmaceutical industry structure.
I found that R&D intensity has a positive effect on the firm growth rate where the R&D scale a negative effect on the firm growth rate at the upper quantile, whereas the result is opposite at the lower quantile. Firm size has a mixed relationship with sales growth at the upper quantile, thus Gibrat’s law is rejected in the Korean pharmaceutical industry. Firm age has a negative relationship with the sales growth rate at the upper quantile, which shows the consistent result with previous research that young firms grow faster. Patent persistence has a negative relationship with sales growth at the upper quantile, while a positive effect at the lower quantile. I show that young firms and firms with high R&D intensity contribute to the high growth rate, while the relationship is not clear at the lower quantile. Therefore, policy implication in this research is that the government should pay attention to encouraging and supporting R&D investment activities and small firms as well as consider ways to enhance patent rights.

국문 초록 (Abstract)

本 硏究에서는 分位回歸法 을 利用하여 2007年부터 2018年까지의 上場된 製藥會社 데이터를 가지고, 韓國製藥産業構造에서 會社 固有한 要因과 革新活動이 賣出成長率에 미치는 影響을 調査하였다.
企業成長은 經濟成長의 基礎를 이루는 重要한 主題이며, 企業이 가지는 異質性 때문에 企業成長은 巨視經濟側面에서의 成長과는 다른 複雜한 樣相을 보인다. 앞으로 企業成長에 관한 理論的硏究와 實證的 硏究가 서로 補完하면서 계속 說明力을 높여 나갈 것이다.
製藥産業은 革新要素들이 企業의 成果에 重要한 役割을 하고 있는 産業의 力動性을 硏究할 수 있는 매우 훌륭한 機會를 提供하고 있다. 製藥産業은 다른 産業과 다른 獨特한 特性을 가지고 있다. 製藥産業은 科學을 基盤으로 하는 事業으로 높은 R&D 集中度가 要求되고, 新藥開發期間이 길고 많은 資源이 投入되어 不確實性이 높아 知的財産權의 强化가 다른 어떤 産業보다 重要하다. 政府의 政策도 情報의 非對稱性에서 나오는 規制와 아울러 成長엔진으로서의 支援政策이라는 두가지 相反된 方向이 共存한다.
最近의 企業成長에 관한 硏究에는 高成長企業에 관한 論議가 活潑하게 이루어지고 있으며, 本 論文에서도 高成長企業에 影響을 미치는 決定要因들과의 關係를 分位回歸法을 使用하여 分析하였다.
上位分位에서 R&D 集中度는 企業成長率에 陽의 효과를 미치고 R&D 規模는 陰의 效果를 가지는 反面에,下位分位에서는 反對의 結果를 보였다. 企業規模는 上位分位에서 企業成長率에 混合된 結果를 보여주어 韓國製藥産業에서 Gibrat의 法則이 有效하지 않음을 보여주었다. 企業年數는 上位分位에서 賣出成長率에 陰의 關係를 보여주었는데 이는 企業年數가 짧은 企業이 더 빨리 成長한다는 先行硏究들과 一致하는 結果였다. 特許의 持續性은 上位分位에서 賣出成長率에 陰의 효과를 보였고 下位分位에서는 陽의 成長을 보였다. 企業年數가 짧은 企業과 R&D 集中度가 높은 企業이 高成長에 寄與를 하는 反面에, 下位分位에서는 그 關係가 분명치 않았다. 그러므로 이 論文에서의 政策含意는 政府가 特許權 强化와 아울러 硏究開發 投資活動과 企業年數가 짧은企業의 奬勵와 支援에 關心을 기울여야 한다는 것이다.

목차 (Table of Contents)

• 國文要約 1
• Acknowledgments 3
• I. Introduction 5
• 1.1 Research Background and Purpose 5
• 1.2 Organization of the Research 6
• II. Growth Models in Economy and Firm-level 8
• 2.1 Economic Growth Model 8
• 2.1.1 The Neoclassical Growth Theory:
• Solow-Swan Model 8
• 2.1.2 Endogenous Growth Model 11
• 2.1.3 Innovation-based Growth Model 12
• 2.２ Firm growth model 15
• 2.2.1 Stochastic Firm Growth: Gibrat’s law 16
• 2.2.2 Neoclassical Optimal Firm Size 18
• 2.2.3 Resource-Based Model 19
• 2.2.4 Managerial Theory of the Firm 19
• 2.2.5 Microfoundations of Schumpeterian
• Growth Theory 20
• III. Innovation and Growth in the Pharmaceutical Industry
• 3.1 Characteristics of the Pharmaceutical Industry 21
• 3.1.1 Science-Based Business 21
• 3.1.2 High R&D Intensity 22
• 3.1.3 Importance of Protection of Intellectual Property 24
• 3.1.4 Regulation industry 24
• 3.2 Challenges & Opportunities for Growth in the
• Pharmaceutical Industry 25
• 3.2.1 Challenges for growth 25
• 3.2.2 Opportunities for growth 27
• 3.3 Global Market Overview 29
• 3.3.1 Global Market Trend 29
• 3.3.2 R&D Trend 31
• 3.4 Korea Pharmaceutical Industry Overview 32
• 3.4.1 Market Overview 32
• 3.4.2 R&D and Drug Development 37
• 3.4.3 Government Policy 41
• IV. Literature Review and Hypotheses 43
• 4.1 Firm Size, Age, and Growth 43
• 4.2 R&D, Innovation and Growth 45
• 4.3 Competition, Industry Structure, and Growth 47
• 4.4 Other determinants and firm growth 48
• 4.4.1 Productivity and firm growth 48
• 4.4.2 Firm-Specific, Industry-Specific, Macro Factors 49
• 4.5 Hypotheses Development 50
• 4.5.1 Relationship between Firm Size, Age,
• and Firm Growth 50
• 4.5.2 Relationship between R&D and Firm Growth 51
• V. Data and Descriptive Analysis 52
• 5.1 Data 52
• 5.2 Variables 53
• 5.3 Preliminary Descriptive Analysis of High Growth Firms 55
• 5.4 Preliminary Analysis of Dynamics and Competitive
• Environment 58
• VI. Quantile Regression Analysis of High Growth Firms
• 6.1 Quantile Regression Approach 62
• 6.2 Test Model 63
• VII. Result 65
• 7.1 Relationship between Firm Size, Age, and Firm Growth 68
• 7.2 Relationship between R&D and Firm Growth 69
• 7.3 Patent Persistence Variable 72
• VIII. Conclusion 73
• Appendix A 76
• References 77
• Abstract 87
•