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<p>This paper examines whether R&amp;D investment enhances firm growth and profitability in the Indian pharmaceutical industry, with particular attention to capability thresholds, heterogeneity, and peer spillovers. Using an unbalanced panel of 195 listed pharmaceutical firms from 2012 to 2024, we estimate fixed-effects regressions, propensity score matching, and quantile regressions to assess the impact of R&amp;D intensity and adoption on sales growth and profitability, while accounting for firm heterogeneity and selection bias. Results show that firms with higher R&amp;D investment tend to experience lower short-run growth but stronger long-run growth, consistent with the delayed innovation payoffs. Investment intensity consistently supports growth, whereas profitability and leverage do not mitigate short-run R&amp;D adjustment costs. Peer R&amp;D exposure generates modest spillover benefits, and heterogeneity analysis indicates that fast-growing firms are better able to absorb R&amp;D costs. This study provides novel firm-level evidence on R&amp;D payoffs in the Indian pharmaceutical sector during the post-TRIPS and post-demonetization period, extending prior OECD-based evidence to an emerging-market context.</p>

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Short-run pain, long-term gain? R&D investment and firm growth in Indian pharma

  • 期刊论文

  • 发表日期：

    2026年7月9日

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  • Rosa Cocozza,
  • Serena Gallo,
  • Amith V. Megaravalli,
  • Vincenzo Verdoliva

摘要

This paper examines whether R&D investment enhances firm growth and profitability in the Indian pharmaceutical industry, with particular attention to capability thresholds, heterogeneity, and peer spillovers. Using an unbalanced panel of 195 listed pharmaceutical firms from 2012 to 2024, we estimate fixed-effects regressions, propensity score matching, and quantile regressions to assess the impact of R&D intensity and adoption on sales growth and profitability, while accounting for firm heterogeneity and selection bias. Results show that firms with higher R&D investment tend to experience lower short-run growth but stronger long-run growth, consistent with the delayed innovation payoffs. Investment intensity consistently supports growth, whereas profitability and leverage do not mitigate short-run R&D adjustment costs. Peer R&D exposure generates modest spillover benefits, and heterogeneity analysis indicates that fast-growing firms are better able to absorb R&D costs. This study provides novel firm-level evidence on R&D payoffs in the Indian pharmaceutical sector during the post-TRIPS and post-demonetization period, extending prior OECD-based evidence to an emerging-market context.