When the Big One Came: A Natural Experiment on Demand Shocks and Market Structure in India’s Influenza Vaccine Markets

37 Pages Posted: 1 Feb 2016 Last revised: 20 Jul 2020

See all articles by Arzi Adbi

Arzi Adbi

National University of Singapore

Chirantan Chatterjee

Indian Institute of Management, Ahmedabad

Matej Drev

Georgia Institute of Technology

Anant Mishra

University of Minnesota - Twin Cities - Carlson School of Management

Date Written: August 14, 2017

Abstract

This paper examines the relationship between exogenous demand shocks and market structure in India’s influenza vaccine markets. Using a novel dataset of detailed purchasing information for vaccines in the country, and exploiting the occurrence of the 2009-10 global H1N1 pandemic as an exogenous demand shock, we provide evidence of heterogeneous responses to the shock by domestic and multinational vaccine manufacturers in the influenza vaccine market relative to our control group of all other vaccine markets. We find that such a shock results in reversal of market structure for influenza vaccines in India, with a decline in market share of multinational vaccine manufacturers and significant gains in market share of domestic vaccine manufacturers. This reversal of the market structure is driven by increased innovation efforts by domestic vaccine manufacturers, whose effects persist even after the shock is over. Finally, we examine the role of targeted policy instruments aimed at stimulating innovation in domestic vaccine manufacturers. Our results remain robust to the use of alternative controls, synthetic controls, and various estimation methodologies. They provide new evidence regarding the role of demand shocks in creating differential incentives for domestic and multinational vaccine manufacturers to innovate in an emerging economy context. In addition, our results offer useful insights into the role of policy regarding pandemic preparedness in emerging markets facing adverse welfare effects from pandemics.

Keywords: demand shocks, influenza, innovation, emerging economy, public policy, natural experiment

Suggested Citation

Adbi, Arzi and Chatterjee, Chirantan and Drev, Matej and Mishra, Anant, When the Big One Came: A Natural Experiment on Demand Shocks and Market Structure in India’s Influenza Vaccine Markets (August 14, 2017). George Mason University School of Business Research Paper No. 18-3, Available at SSRN: https://ssrn.com/abstract=2724982 or http://dx.doi.org/10.2139/ssrn.2724982

Arzi Adbi

National University of Singapore ( email )

15 Kent Ridge Drive
Mochtar Riady Building
Singapore, Singapore 119245
Singapore

Chirantan Chatterjee

Indian Institute of Management, Ahmedabad ( email )

Vastrapur
Ahmedabad, Gujarat 380 015
India

HOME PAGE: http://https://www.iima.ac.in/web/faculty/faculty-profiles/chirantan-chatterjee

Matej Drev

Georgia Institute of Technology ( email )

Atlanta, GA 30332
United States

Anant Mishra (Contact Author)

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

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