The Innovation Performance and its Determinants of Korean Pharmaceutical Industry

The pharmaceutical industry has become one of the most powerful and potential industry for the economic growth in the world. Accordingly, many countries have increased research and development (R&D) investment with the goal of producing new drugs. As R&D in the pharmaceutical industry became increasingly important, so did the evaluation of the effectiveness and efficiency of expanding R&D investment. Evaluating and managing R&D efficiency are essential for enhancing the performance produced by R&D activities. However, only a few studies on evaluating R&D efficiency quantitatively have been conducted so far because of the complexity and uncertainty of R&D activity. Therefore, in this paper I suggested the fuzzy DEA method which is useful for dealing with the uncertainty inherent in R&D data to evaluate R&D efficiency and applied it to Korean pharmaceutical firms. Additionally, the Malmquist index was employed to understand the R&D efficiency change over time and decomposed into the relative efficiency change and the technology change in order to determine the main factor for the R&D efficiency change. According to these results, the R&D efficiency of Korean pharmaceutical firms had not improved for the period 2003∼2006, but increased for the period 2007∼2009. This R&D efficiency change mainly resulted from technology change rather than the relative efficiency change