Pharmaceutical
industry is one of the most important industries of some countries. For
example: Korea and US. It is really hard to compete in this industry, only
firms that are productive and efficient can survive. The article’s purpose is analyzing
the relationship between the pharmaceutical firms’ structure and their
efficiencies. It investigates relationship of investor structure and R&D as
well. This article shows the links between ownership structure and R&D investment
with the “return-to-scales and firm characteristics”.
The
article mentions about some theoretical background and hypothesis:
-
Ownership
effects on efficiency: owners/managers always pay their attention on cost managing
because of its general implication of firms’ efficiency. There, hence, is
hypothesis as following: largest (or blockholder) rate, institutional ownership
rate, and foreign ownership rate are related to efficiency.
-
Ownership
effects on R&D: increasing productivity of R&D investment is very
important thing because this industry has the highest portion of R&D
activity among manufacturing industries. So, the authors have hypothesis about
the relationship between largest or blockholder, institutional ownership rate
and foreign ownership rate, and firm’s efficiency.
Methodology
of the study (You and Zi, 2007): (1) estimating four different types of
efficiency (cost, alloccative, technical and scale) based on Data Envelopment
Analysis method; (2) using regression techniques of Tobit and Panel about Ordinary
Least Squares in order to regress efficiency scores.
Data
is collected from 32 Korean and 38 US pharmaceutical firms from 1992 to 2004.
Results of this study support the above hypothesises. However, there are not a
direct comparative of efficiency scores between the two firms’ groups from
Korea and from USA.
Three
worthy points: (1) in Korean, pharmaceutical firms cost inefficiency’s level
may due to the allocative inefficiency’s level; (2) in USA, it dues to the
technical inefficiency’s level; (3) after 2002, there is an improvement in cost
and allocative efficiencies of Korean pharmaceutical firms.
At
the end, the authors confirm that there is “causal links among efficiency,
R&D and ownership”. The results from the study in Korean and US
pharmaceutical firms can be used in “pushing competitions between domestic and
foreign pharmaceutical firm to new levels”. To do this, having timely changes
in restructuring ownership and improving R&D strategies (efficiently and
productively) in managing pharmaceutical corporates is vital. And, this is the
implications of management in doing business internationally.
The author suggests ownership turnover is essential for advancing efficiencies. How does an industry govern ownership turnover?
ReplyDeleteWell, this is a hard and interesting question. This study examine the relationship between efficiency and ownership and R&D,and results support authors' hypotheses. A timely change in structuring ownership and R&D plan is important for firms. So, a testing theory study, of course, does not answer for the question "how". There will be others studies that have some information. https://www.kellogg.northwestern.edu/faculty/li/htm/Li%20Au%20Fong%20Reputation%20Turnaround.pdf
ReplyDeleteI think, the study from the above link somehow has useful information.