Estimating R&D Returns In Health Care Industry
Estimating R&D Returns In Health Care Industry

Summary/Abstract: Purpose: This paper provides an empirical evaluation of R&D returns for a series of global companieswho lead in innovation within the health care industry.Methodology: The estimation procedure bases on two specifications: the parametric productionfunction setting, and finite distributed lag model (FDL).Findings: Using the most recent data on R&D investment by health care equipment and servicesalong pharmaceuticals and biotechnology companies, we confirm the positive albeit mitigatedimpact of R&D efforts on performance indicators (levels of sales). Moreover, we comment on thecurrent phenomena observed in health care industry and offer a policy view for ongoing and futurechallenges in the sector.Added value: Since there is a dearth of recent empirical evidence on R&D returns in the broadhealth industry, this paper offers the evaluation of economic incentives for companies to invest inR&D. These incentives embrace the induced increase in sales and profits levels. The authors participatein a public debate concerning the optimal levels of R&D rewards required to sustain theinnovation within the sector.

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