| The question of whether IP incentivizes innovation is a long debated one in the literature on economics of innovation and technological change. The first chapter explores this fundamental question in an emerging market context, applying a 'private returns to R&D framework' to the Indian bio-pharmaceutical industry. In a fundamental policy shift, India agreed to introduce product patents for pharmaceuticals when it signed the WTO TRIPS treaty in 19951.1 This policy came into effect through enabling legislation in 2000 and final implementation in 2005. Using this policy shift as the setting for a natural experiment, the paper estimates its impact by using data on a panel of 315 Indian pharmaceutical firms drawn from the years 1990 to 2005. Private returns of a firm are measured using a hedonic stock market valuation of the tangible total assets (A) and intangible inventive assets (K). The findings indicate an economic and statistically significant increase in private returns to inventive activity. However, this effect appears to he highly concentrated in the most technologically progressive Indian firms. Subsequent investigations through firm-level field case studies, patent data analysis and discussions with industry experts reveal that IP apart, economic liberalization in India since 1991 and the Hatch-Waxman Act in the United States have had accompanying effects in guiding the evolution of the industry.;During the period of our analysis, a substantial number of Indian bio-pharmaceutical firms became export intensive, with enhanced access to Western markets. This came about aided by a rationalized currency regime through an economic reforms process in India. The 2nd chapter explores how export destinations and firm capabilities influence the extent of learning by exporting (LBE) in Indian pharmaceutical firms that exported to a variety of both advanced and emerging destinations between 1994 and 2007. Departing from previous studies the paper explores if exports result in other gain besides improvements in technical efficiency. We find that LBE is not restricted to technical efficiency gains alone but also reduces costs of production. Furthermore, exporters also gain access to other types of knowledge that improves R&D efficiency and the rate of new product introductions. Interestingly these gains are more especially when firms export to high income destinations (as evidenced from higher gains when firms export to US rather than non-US destinations). Finally, results also indicate that the gains are higher for more capable firms.;The third chapter connects the rise of the Indian bio-pharmaceutical producers to the global value chain in the pharmaceutical industry. Specifically, it explores the welfare effects of early generic entry in the United States during the period 1997 and 2008. This is the period during which, with increasing frequency, generic drug manufacturers in the United States (many from Israeli, India, North America, or European Union) have been able to challenge the monopoly status of patent-protected drugs even before the patents expire. The legal foundation for these challenges is found in Paragraph IV of the Hatch-Waxman Act. If successful, these Paragraph IV challenges generally lead to large market share losses for incumbents and sharp declines in average market prices. The 3rd chapter estimates, for the first time, the welfare effects of accelerated generic entry via these challenges. Using aggregate brand level sales data between 1997 and 2008 for hypertension drugs in the U.S. we estimate demand using a nested logit model in order to back out cumulated consumer surplus, which we find to be approximately ;1World trade Organization's Trade Related Intellectual Property Agreement. |
