Since the late 1970s, pharmaceutical R&D has grown at a rapid rate relative to sales and other variables. In this paper, we examine the determinants of pharmaceutical R&D using a pooled data sample of 11 major drug firms over the period 1974 to 1994. We find that expected returns and cash flows...

The pharmaceutical industry has an outstanding record of innovative performance over the past 50 years. The R&D process has become more knowledge-based and a market for innovation has emerged between research start-ups, development-stage firms, and the larger, multinational companies. At the...