Impact of Profitability, R&D Intensity, and Cash Flow on R&D Expenditure in Pharmaceutical Companies

13 Pages Posted: 5 May 2011

See all articles by Destrina Grace Simanjuntak

Destrina Grace Simanjuntak

Dexa Laboratories of Biomolecular Sciences, Dexa Medica Group

Raymond R. Tjandrawinata

Dexa Laboratories of Biomolecular Sciences, PT Dexa Medica

Date Written: April 29, 2011

Abstract

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.

Keywords: Research and Development Expenditure, Profitability, R&D Intensity, Cash Flow

JEL Classification: I11, L21, L65, O30

Suggested Citation

Simanjuntak, Destrina Grace and Tjandrawinata, Raymond R., Impact of Profitability, R&D Intensity, and Cash Flow on R&D Expenditure in Pharmaceutical Companies (April 29, 2011). Available at SSRN: https://ssrn.com/abstract=1824267 or http://dx.doi.org/10.2139/ssrn.1824267

Destrina Grace Simanjuntak

Dexa Laboratories of Biomolecular Sciences, Dexa Medica Group ( email )

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Raymond R. Tjandrawinata (Contact Author)

Dexa Laboratories of Biomolecular Sciences, PT Dexa Medica ( email )

Tangerang
Indonesia

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