Entrepreneurship and Desperate Poverty: Biopharmaceutical Innovation in China, India, and Brazil
Abstract: Poverty is intricately linked to pervasive underlying health problems, including infectious diseases that are rare in wealthy countries. Prior research has documented that leading bio-pharmaceutical firms have not invested comprehensively in diseases that mainly affect patients in developing countries. Theory suggests that indigenous firms may have a greater incentive to invest in diseases that primarily affect poor patients than large biopharmaceutical multinationals. Yet little empirical evidence exists of significant biopharmaceutical innovation in emerging markets. In this paper, we provide evidence from three countries where poverty is prevalent -- Brazil, China, and India -- that a growing number of indigenous biopharmaceutical companies are investing in innovation on diseases that primarily affect the poor. The results suggest a subtle set of interrelationships as co-located firms benefit from spillovers across research projects. We identify complementarities for performance in the clustering of disease-targeted projects but substitution effects for performance in the clustering of firms. These results indicate that indigenous bio-pharmaceutical firms are most productive when they co-specialize to maximize knowledge spillovers and minimize competition for funding and knowledge workers.
