Impact of Profitability, R&D Intensity, and Cash Flow on R&D Expenditure in Pharmaceutical Companies
Destrina Grace Simanjuntak
Dexa Laboratories of Biomolecular Sciences, Dexa Medica Group
Raymond R. Tjandrawinata
Department of Business Development and Dexa Laboratories of Biomolecular Sciences, PT Dexa Medica
April 29, 2011
This paper empirically examines the influence of the determinants of R&D expenditure, such as firm’s lagged profitability, R&D intensity, and cash flow on R&D expenditure of the pharmaceutical companies. All of them have an important roles in determining the steps of the corporate strategy to investing in R&D activities. The data used in this study was gathered from six large pharmaceutical companies in the U.S., in the period of 2003 to 2010. The result shows that firm’s lag profitability, R&D intensity, and cash flow have the positive influence and affect significantly the firms amount R&D expenditure in the pharmaceutical companies. Thus, enhancement in the firm’s one-year lagged profitability, R&D intensity, and cash flow can increase firm’s amount of R&D expenditure.
Number of Pages in PDF File: 13
Keywords: Research and Development Expenditure, Profitability, R&D Intensity, Cash Flow
JEL Classification: I11, L21, L65, O30
Date posted: May 5, 2011
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