Hostname: page-component-8448b6f56d-jr42d Total loading time: 0 Render date: 2024-04-23T09:28:03.141Z Has data issue: false hasContentIssue false
  • English
  • Français

Innovation and business sustainability (IBS): empirical evidence from Indian pharmaceutical industry (IPI)

Published online by Cambridge University Press:  23 April 2019

Brajaballav Pal Open the ORCID record for Brajaballav Pal [Opens in a new window]  and
Mithun Nandy
Brajaballav Pal
Affiliation:
Department of Commerce with Farm Management, Vidyasagar University, Midnapore – 721102, West Bengal, India
Mithun Nandy*
Affiliation:
Department of Business Administration, Vidyasagar University, Midnapore – 721102, West Bengal, India
*
Author for correspondence: Mithun Nandy, E-mail: mba.mithun@gmail.com
Get access Rights & Permissions [Opens in a new window]

Abstract

The aim of our study is to investigate how innovation is taking place through different research and development (R&D) activities and to establish a link between innovation and business sustainability in the context of Indian pharmaceutical companies. Our study is based on the secondary data. Sample data of 37 Indian pharmaceutical companies listed on the National Stock Exchange have been used based on the stratified sampling technique. For empirical analysis we have performed descriptive statistics, correlation matrix, and panel regression analysis as statistical techniques with the help of STATA 12.0 statistical package. R2 value can predict 100 and 98.20% variability in return on assets (ROA) and return on equity (ROE) in model 1 and model 2, respectively. In model 1, the value of c2 is 1.48 and its corresponding p value is 0.00 (<0.05) which means that the model is a good fit for interpretation. R&D intensity is having a positive effect on ROA and the effect is statistically significant at 1% level. Advertising and marketing intensity, capital intensity, leverage ratio and operating expenditure to the total assets ratio are having positive effect on ROA but the effect is not statistically significant. In model 2, the value of F statistics is 8025.62 and its corresponding p value is 0.00 which is <0.05. It means that the model is a good fit for study. R&D intensity is having a positive effect on ROE and the effect is statistically significant at 1% level. Advertising and marketing intensity, capital intensity and operating expenditure to the total assets ratio have positive effect on ROE and the effect is statistically significant at 1% level. Leverage ratio is having a negative effect on ROE but the effect is statically significant at 10% level.

Keywords

Innovationsustainable developmentresearch and developmenthealthcarebusinessmarketingO31Q01O32I11E30M31
Type
Research Article
Information
AI EDAM , Volume 33 , Special Issue 2: Knowledge Engineering and Management Applied to Innovation , May 2019 , pp. 117 - 128
Copyright
Copyright © Cambridge University Press 2019 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Atalay, M, Sarvan, F and Anafarta, N (2013) The relationship between innovation and firm performance: empirical evidence from Turkish automotive supplier industry. Social and Behavioral Sciences 13, 226–235.Google Scholar
Ayaydin, H and Karaaslan, I (2014) The effect of research and development investment on firms’ financial performance: evidence from manufacturing firms In Turkey. The Journal of Knowledge Economy & Knowledge Management 9, 43–49.Google Scholar
Bhagwat, Y, DeBruine, M and Gondhalekar, V (2001) R&D Leverage – a measure to evaluate the impact of R&D on earnings of pharmaceutical companies. Journal of Research in Pharmaceutical Economics 1, 55–68.Google Scholar
Christina Sheela, S and Karthikeyan, K (2012) Financial performance of pharmaceutical industry in India using DuPont analysis. European Journal of Business and Management 4, 84–91.Google Scholar
Cooper, MJ, Gulen, H and Schill, MJ (2008) Asset growth and the cross-section of stock returns. The Journal of Finance 63, 1–34.Google Scholar
Donelson, DC and Resutek, RJ (2012) The effect of R&D on future returns and earnings forecasts. Review of Accounting Studies 17, 848–876. Available at http://faculty.tuck.dartmouth.edu/images/uploads/faculty/robert-resutek/RAST2012.pdf (Accessed 18 October 2017).Google Scholar
Drucker, PF (2002) The Discipline of Innovation. Available at https://hbr.org/2002/08/the-discipline-of-innovation (Accessed 8 August 2017).Google Scholar
Ehie, I and Olibe, K (2010) The effects of R&D investment on firm value: an examination of US manufacturing and service industries. International Journal of Production Economies 128, 127–135.Google Scholar
Erickson, G and Jacobson, R (1992) Gaining Comparative Advantage through Discretionary Expenditures: The Returns to R&D and Advertising. Available at https://doi.org/10.1287/mnsc.38.9.1264 (Accessed 14 August 2017).Google Scholar
Freihat, AR and Kanakriyah, R (2017) Impact of R&D expenditure on financial performance: Jordanian evidence. European Journal of Business and Management 9, 73–83.Google Scholar
Geoffrey, A and Pal, V (2015) Impact of R&D expenses and corporate financial, performance. Journal of Accounting and Finance 15, 135–149.Google Scholar
Hayes, RH and Abernathy, WJ (1980) Managing our way to economic decline. Harvard Business Review 58, 67–77.Google Scholar
Jui, H-F, Yen, C-M, Cheng, C-Y and Chieh, W-W (2017) An empirical study on the relationship between R&D and financial performance. Journal of Applied Finance & Banking 3, 107–119.Google Scholar
Kafouros, MI and Forsans, N (2012) The role of open innovation in emerging economies: do companies profit from the scientific knowledge of others? Journal of World Business 47, 362–370.Google Scholar
Kiran, R and Mistra, S (2011) Research and development, exports and patenting in the Indian pharmaceutical industry: a post TRIPS analysis. Eurasian Journal of Business and Economics 4, 53–67.Google Scholar
Nandy, M and Pal, B (2017) Does Research & Development (R&D) activities impact financial performance? An empirical study based on selected multinational (MNC) pharmaceutical companies operating in India. Presidency Journal of Management Thought & Research VII, 39–63.Google Scholar
Nidumolu, R (2009) Why Sustainability Is Now the Key Driver of Innovation? Available at https://hbr.org/2009/09/why-sustainability-is-now-the-key-driver-of-innovation (Accessed 10 September 2017).Google Scholar
Rao, J, Yu, Y and Cao, Y (2013) The effect that R&D has on company performance: comparative analysis based on listed companies of technique intensive industry in China and Japan. International Journal of Education and Research 1, 1–8.Google Scholar
Ray, S and Chittoor, R (2007) Internationalization paths of Indian pharmaceutical firms – A strategic group analysis. Journal of International Management 3, 338–355.Google Scholar
Shankaran, K (2016) Financial performance evaluation of pharmaceutical companies in India. International Journal of Research in Computer Application & Management.Google Scholar
Tyagi, S, Mahajan, V and Nauriyal, DK (2014) Innovations in Indian drug and pharmaceutical industry: have they impacted exports? Journal of Intellectual Property Rights 19, 243–252.Google Scholar
Wang, C-H (2011) Clarifying the effects of R&D on performance: evidence from the high technology industries. Asia Pacific Management Review 16, 51–64.Google Scholar
Xin, Y (2015) First-mover: Are Technologically New Products a Competitive Advantage. 3rd International Conference on Management, Education, Information and Control (MEICI 2015). Atlantis Press, pp. 87–91. Available at https://www.atlantis-press.com/php/download_paper.php?id=25044 (Accessed 11 October 2017).Google Scholar
Zambad, S and Londhe, BR (2014) To study the scope & importance of amended patent Act on Indian pharmaceutical company with respect to innovation. Procedia Economics and Finance 11, 819–828.Google Scholar