| The purpose of this research is to investigate the strategic choice made in the pharmaceutical industry on the level of research and development expenditures. This strategy is examined to determine if it follows the expectations of the lifecycle theory. Prior literature demonstrates the importance of research and development in the pharmaceutical industry. Despite the importance of research and development, very little research in this area has been done to identify significant predictors of research and development levels. With much attention focused on the pharmaceutical industry from the media, regulators, and the public, determining causal factors for the expenditure levels of research and development will be useful in shaping future policies on acceptable levels of research and development for the pharmaceutical industry. In this research, confirmation of the lifecycle theory and its constructs in the pharmaceutical industry is tested using ANOVA. A t-test between means is used to demonstrate significant differences in research and development spending by different stages. Finally, structural equation modeling (SEM), which identifies significant correlations among variables, is used to identify the relationships as well as the direction of these relationships within each stage. Results indicate significant differences in the level of research and development spending among stages with the start-up stage firms spending the largest percentage of research and development and the mature stage firms spending the least. Most noted differences among the research constructs on the level of research and development spending are the negative impact of institutional investors on research and development spending in start-up firms and positive impact of firm visibility on mature firms. |
