Technical Change and Firm Size: The Pharmaceutical Industry

The plan of this paper is as follows: First, we summarize and point out several problems we found with Comanor's study. Section III presents the results from a two-equation model that decomposes the technical change measure into an R and D component and a marketing component. The final section is an analysis of the elasticity of technical change with respect to firm size. The total elasticity is shown to consist of two parts - a "direct" and an "indirect" effect of size. The indirect effect is the effect on technical change of the increase in R and- D inputs (induced by an increase in firm size). In this section we make use also of a maximum likelihood estimation technique developed by Tobin (1958) for cases where the dependent variable is limited, as is the case for our sample