The Impact of the Act for the Development of Biotech and New Pharmaceuticals Industry on Firm Innovation.

Woan-Lih Liang, Tai-cheng Liu

Research output: Contribution to journalArticlepeer-review

Abstract

This study investigates how the innovation activities of the biotech and new pharmaceuticals industry (biopharmaceutical industry) change after the exogenous shock of the enactment of the Act for the Development of Biotech and New Pharmaceuticals Industry (Biopharmaceutical Act). We adopt Propensity Score Matching (PSM) and Difference-in-difference (DID) approaches to deal with sample selection bias and endogeneity problems. We find that approved biopharmaceutical firms engage in more innovation investments after the passage of the Biopharmaceutical Act than unapproved firms. We also confirm the policy effectiveness of the Biopharmaceutical Act, finding that approved biopharmaceutical firms are more encouraged to engage in innovation activities than high-tech firms after the Biopharmaceutical Act. In addition, the stimulation effect on innovation exists only for pharmaceutical and low R&D intensity firms. In the subsample analysis of the inter-industry effects, the stimulation effect is driven primarily by low R&D intensity firms and small firms. These findings consolidate the effectiveness of the Biopharmaceutical Act for biopharmaceutical firms with more serious R&D underinvestment problems. Our investigation also shows the effectiveness of tax credits granted by the Biopharmaceutical Act for the R&D investment of biopharmaceutical firms in Taiwan.
Translated title of the contribution生技新藥產業發展條例對公司創新影響
Original languageEnglish
Pages (from-to)129-188
Number of pages60
JournalNTU Management Review
Volume31
Issue number2
DOIs
StatePublished - Aug 2021

Keywords

  • Innovation
  • R&D
  • tax credits
  • propensity score matching
  • difference-in-difference

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