Scale, Scope, and Spillovers: The Determinants of Research Productivity in Drug Discovery

RAND J. OF ECONOMICS, Vol. 26, No. 1

Posted: 15 Jul 1998

See all articles by Rebecca M. Henderson

Rebecca M. Henderson

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

Iain M. Cockburn

Boston University Questrom School of Business; National Bureau of Economic Research (NBER)

Abstract

We examine the relationship between firm size and research productivity in the pharmaceutical industry. Using detailed internal firm data, we find that larger research efforts are more productive, not only because they enjoy economies of scale, but also because they realize economies of scope by sustaining diverse portfolios of research projects that capture internal and external knowledge spillovers. In pharmaceuticals, economies of scope in research are important in shaping the boundaries of the firm, and it may be worth tolerating the static efficiency loss attributable to the market power of large firms in exchange for their superior innovative performance.

JEL Classification: G14

Suggested Citation

Henderson, Rebecca M. and Cockburn, Iain M., Scale, Scope, and Spillovers: The Determinants of Research Productivity in Drug Discovery. RAND J. OF ECONOMICS, Vol. 26, No. 1, Available at SSRN: https://ssrn.com/abstract=7050

Rebecca M. Henderson

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

E52-543
Cambridge, MA 02142
United States
617-253-6618 (Phone)
617-253-2660 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Iain M. Cockburn (Contact Author)

Boston University Questrom School of Business ( email )

595 Commonwealth Avenue
Boston, MA MA 02215
United States
617-353-3775 (Phone)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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