CYCLICAL CONCENTRATION AND BIOTECH R&D ACTIVITY: A NEO-SCHUMPETERIAN MODEL

Several characteristics of biotech industry structure follow cyclical patterns. Mergers and acquisitions activity shows cyclical behavior, with peaks from 1988-92 and 1996-97 and a valley from 1993-95. The ratio of large-firm to small-firm field trials, and the Herfindahl-Hirshmann concentration index, move pro-cyclically with M&A activity. This paper develops a formal, dynamic, neo-Schumpeterian model of endogenous R&D and innovation. The model generalizes and extends the literature on biotech industry concentration. For specified parameter values, the out-of-steady-state dynamics are examined, and shown to generate model behavior which is consistent with empirical descriptions of biotech concentration and R&D-activity cycles.


Issue Date:
1999
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/11792
Total Pages:
12
Series Statement:
Staff Paper 99-60




 Record created 2017-04-01, last modified 2017-08-23

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