TY - JOUR
T1 - Competition and R&D Financing
T2 - Evidence From the Biopharmaceutical Industry
AU - Thakor, Richard T.
AU - Lo, Andrew W.
N1 - Publisher Copyright:
©
PY - 2022/8/26
Y1 - 2022/8/26
N2 - The interaction between product market competition, R&D investment, and the financing choices of R&D-intensive firms on the development of innovative products is only partially understood. We hypothesize that as competition increases, R&D-intensive firms will: i) increase R&D investment relative to existing assets in place; ii) carry more cash; and iii) maintain less net debt. Using the Hatch-Waxman Act as an exogenous shock to competition, we provide causal evidence supporting these hypotheses through a differences-in-differences analysis that exploits differences between the biopharma industry and other industries, and heterogeneity within the biopharma industry. We also explore how these changes affect innovative output.
AB - The interaction between product market competition, R&D investment, and the financing choices of R&D-intensive firms on the development of innovative products is only partially understood. We hypothesize that as competition increases, R&D-intensive firms will: i) increase R&D investment relative to existing assets in place; ii) carry more cash; and iii) maintain less net debt. Using the Hatch-Waxman Act as an exogenous shock to competition, we provide causal evidence supporting these hypotheses through a differences-in-differences analysis that exploits differences between the biopharma industry and other industries, and heterogeneity within the biopharma industry. We also explore how these changes affect innovative output.
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U2 - 10.1017/S0022109021000284
DO - 10.1017/S0022109021000284
M3 - Article
AN - SCOPUS:85104938162
SN - 0022-1090
VL - 57
SP - 1885
EP - 1928
JO - Journal of Financial and Quantitative Analysis
JF - Journal of Financial and Quantitative Analysis
IS - 5
ER -