The Pharmaceutical Industry
Abstract
FISHER and TEMIN (1973) have argued recently that many empirical studies1 relating
to the Schumpeterian hypothesis are inappropriate for testing that hypothesis. They
observe that Schumpeter can be interpreted as hypothesizing that the elasticity of
the value of research and development (R and D) output with respect to firm size is
greater than unity. On the other hand, the empirical studies have been concerned with
investigating the elasticity of R and D inputs with respect to firm size. Fisher and
Temin demonstrate that a finding that the R and D input elasticity exceeds unity does
not imply that the R and D output elasticity exceeds unity also. Given that public
policy formulation should be based on tests of the Schumpeter hypothesis rather than
on tests of the R and D input elasticity, their point is well taken. Of course, in
defense of the empirical studies, it can be argued that data limitations have restricted
testing to the R and D input elasticity, and that most of the researchers have been
aware that they were not testing the Schumpeter hypothesis.............
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Show full item recordScholars@Duke
Henry G. Grabowski
Professor Emeritus of Economics
Professor Grabowski specializes in the investigation of economics in the pharmaceutical
industry, government regulation of business, and the economics of innovation. His
specific interests within these fields include intellectual property and generic competition
issues, the effects of government policy actions, and the costs and returns to pharmaceutical
R&D. He has over one hundred peer reviewed articles analyzing the economics of pharmaceuticals
and also several books and monograph publica

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