Patents and performance in the Japanese pharmaceutical industry: An institution-based view

In this paper we analyze the strategic response of Japanese pharmaceutical firms to increased competitive pressure. During the 1980’s and 1990’s entry barriers were lifted and markets deregulated. As a consequence transaction structures moved from a relationship based mode towards a market based mode where competition is based on research excellence and new and innovative products. Using panel data of a sample of Japanese pharmaceutical companies, this paper discusses the effect of international patents as an indicator of research capabilities on subsequent corporate performance measured as profits on total assets. Our empirical result suggests that a firm’s patent stock is unrelated or even negatively correlated to its profitability.