Entry Decisions in the Generic Pharmaceutical Industry
Volume: Volume 30, No. 3
Issue: Autumn 1999
Pages: pp. 421-440
Authors: Fiona M. Scott Morton
Title: Entry Decisions in the Generic Pharmaceutical Industry
Abstract: Data on all generic drug entries in the period 1984-1994 are used to estimate which markets heterogeneous potential entrants will decide to enter. I find that organizational experience predicts entry. Firms tend to enter markets with supply and demand characteristics similar to the firm's existing drugs. Larger revenue markets, markets with more hospital sales, and products that treat chronic conditions attract more entry. The simultaneous nature of entry leads to an additional interpretation: specialization is profitable because of the severe risk to profits when a market is "overentered." However, I am unable to make any conclusions about the efficiency of entry decisions.
JEL Classification
Chemicals; Drugs (L650)
Production, Pricing, and Market Structure; Size and Size Distribution of Firms Concentration, Product Differentiation, Entry and Exit
(L110)
Industry Studies Manufacturing Chemicals, Drugs, Plastics, Ceramics, Glass, Cement, and Rubber
(6315)
Market Structure: Industrial Organization and Corporate Strategy (6110)