This intention of this research article is to analyze the impact of research and development (R&D) activities on the financial performance of Indian pharmaceutical companies listed with the national stock exchange (NSE) of India. Strongly balanced panel dataset of 40 sample pharmaceutical companies for the period of 1998-2019 (21 years) has been used. In the empirical analysis section: Descriptive Statistics, Bivariate Correlation Matrix, Variation Inflation Factor, Skewness/Kurtosis Tests, Breusch-Godfrey LM Test, Heteroskedasticity Test, Levin-Lin-Chu Unit-Root Test, Generalized Method of Moments (GMM) and panel regression models (Fixed Effect Model and Random Effect Model) followed by Hausman Test have been discussed. For data analysis purpose, STATA (version 12.0) software has been used. To analyze the impact of R&D on financial performance, four different financial performance related variables: Sales Turnover, Return on Assets, Return on Equity, and Market Capitalization have been used as dependent variables and these variables have been placed one after another in four different empirical models which have been estimated in this study. The study has revealed that there is a significant positive impact of R&D activities on the financial performance of Indian pharmaceutical companies listed with NSE during the study period.
AvhadP. (2020). The Indian pharmaceutical industry: The ‘pharmacy of the world’?https://blogs.deloitte.co.uk/health/2020/03/the-indian-pharmaceutical-industry-the-pharmacy-of-the-world.html#:~:text=Over%20the%20past%20120%20years,drugs%20globally%20(Figure%201)
2.
AyaydinH. & KaraaslanI. (2014). The effect of research and development investment on firms’ financial performance: Evidence from manufacturing firms in turkey, The Journal of Knowledge Economy & Knowledge Management, 9, 43–49.
3.
Bengal Chemicals & Pharmaceuticals Limited (2019). BCPL, the first Pharmaceutical Company of India. https://bengalchemicals.co.in/
4.
BhagwatY., DeBruineM. & GondhalekarV. (2001). R&D leverage – a measure to evaluate the impact of R&D on earnings of pharmaceutical companies,Journal of Research in Pharmaceutical Economics, 11(3), 55–68.
5.
Chakraborty, Amitava (2020). Prafulla Chandra Ray: The revolutionary in the garb of a scientist. https://indianexpress.com/article/opinion/columns/prafulla-chandra-ray-bengal-chemist-pharmacy-6368650/
6.
ChittoorR. & SougataR. (2007). Internationalization paths of Indian pharmaceutical firms – A strategic group analysis. Journal of International Management, 3, 338–355.
7.
CinceraM., RaquelO.A. & CastelloP. M. (2009). The Performance of Top R&D Investing Companies in the Stock Market. https://www.researchgate.net/publication/46464580_The_Performance_of_Top_RD_Investing_Companies_in_the_Stock_Market.
8.
CooperM.J., GulenH. & SchillM. J. (2008). Asset Growth and the Cross-Section of Stock Returns,The Journal of Finance, 63(4).
9.
DonelsonD.C. & ResutekR. J. (2012). The effect of R&D on future returns and earnings forecasts,Review of Accounting Studies, 17, 848–876.
10.
DruckerP. (2005). Peter Drucker on marketing. https://www.forbes.com/2006/06/30/jack-trout-on-marketingcx_jt_0703drucker.html#4b09a158555c.
11.
Drug Discovery World (2020). India – Global pharmaceutical R&D powerhouse or contract research workshop?https://www.ddw-online.com/india-global-pharmaceutical-rd-powerhouse-or-contract-research-workshop-617-200704/
12.
EhieI. & OlibeK. (2010). The effects of R&D Investment on firm value: An Examination of US Manufacturing and Service Industries. International Journal of Production Economies, 128, 127–135.
13.
EricksonG. & JacobsonR. (1992). Gaining Comparative Advantage through Discretionary Expenditures: The Returns to R&D and Advertising,Management Science, 38(9), 1264–1279.
14.
Express Pharma (2019). The new realities in pharma R&D. https://www.expresspharma.in/business-strategies/the-new-realities-in-pharma-rd/
15.
FeinbergS. E. & MajumdarS.K. (2001). Technology Spillovers from Foreign Direct Investment in the Indian Pharmaceutical Industry. Journal of International Business Studies , 32(3), 421–437.
16.
GundayG., UlusoyG., KilicK. & AlpkanL. (2011). Effects of innovation types on firm performance,International Journal of Production Economics, 133(2), 662–676.
17.
HayesR.H., & AbernathyW.J. (1980). Managing our way to economic decline. Harvard Business Review, 58(4), 67–77.
18.
HsuF. J., ChenM.Y., ChenY.C. & WangW. C. (2013). An empirical study on the relationship between R&D and financial performance,Journal of Applied Finance & Banking, 3(5), 107–119.
19.
India Brand Equity Foundation (2019). Pharmaceuticals. https://www.ibef.org/download/pharmaceuticals-mar-2019.pdf
20.
India Inc (2020). Reasons why India is the pharmacy to the world. https://indiaincgroup.com/reasons-india-pharmacy-world/
21.
JaisinghaniD. (2016). Impact of R&D on profitability in the pharma sector: an empirical study from India. Journal of Asia Business Studies, 10(2).
22.
KafourosM. & NicolasF. (2012). The role of open innovation in emerging economies: Do companies profit from the scientific knowledge of others?Journal of World Business, 47(3), 362–370.
23.
KalsieA. & NagpalA. (2018). The Determinants of Corporate Debt Maturity for NSE-Listed Corporates. FIIB Business Review, 7(1), 43–56.
24.
KiranR. & MistraS. (2011). Research and Development, Exports and Patenting in the Indian Pharmaceutical Industry: a Post TRIPS Analysis,Eurasian Journal of Business and Economics, 4(7), 53–67.
25.
NairL. (2019). The new realities in pharma R&D. https://www.expresspharma.in/business-strategies/the-new-realities-in-pharma-rd/
26.
NandyM. & PalB. (2017). Does Research & Development (R&D) Activities Impact Financial Performance? An Empirical Study Based on Selected Multinational (MNC) Pharmaceutical Companies Operating in India. Presidency Journal of Management Thought & Research, 7(2), 39–63.
27.
PalB. & NandyM. (2019). Innovation and business, sustainability (IBS): empirical evidence from Indian pharmaceutical industry (IPI), Artificial Intelligence for Engineering Design, Analysis and Manufacturing, 33(2).
PradhanJ.P. (2003). Liberalization, firm size and R&D performance: A firm level study of Indian pharmaceutical industry. Journal of Indian school of political economy, 14(4), 647–666.
30.
PuwarA., JalanK. & GargA. (2016). Financial performance evaluation of pharmaceutical companies in India. International Journal of Science and Research, 418–426.
31.
RamaniS. V. (2002). Who is interested in biotech? R&D strategies, knowledge base and market sales of Indian biopharmaceutical firms. Research Policy, 31(3), 381–398.
32.
RaoJ., YuY. & CaoY. (2013). The effect that R&D has on company performance: comparative analysis based on listed companies of technique intensive industry in China and Japan,International Journal of Education and Research, 1(4), 1–8.
33.
RazaqA., FreihatF. & KanakriyahR. (2017). Impact of R&D Expenditure on Financial Performance: Jordanian Evidence,European Journal of Business and Management, 9(32), 73–83.
34.
SheelaC. & KarthikeyanK. (2012). Financial performance of pharmaceutical industry in India using DuPont analysis. European Journal of Business and Management, 4(14), 84–91. https://www.iiste.org/Journals/index.php/EJBM/article/view/2843
35.
VanderpalG.A. (2015). Impact of R&D Expenses and Corporate Financial, Performance,Journal of Accounting and Finance, 15(7), 135–149.
36.
WangC.H. (2011). Clarifying the effects of R&D on performance: evidence from the high technology industries,Asia Pacific Management Review, 16(1), 51–64.
