Innovation and Structural Change in Pharmaceuticals and Biotechnology

The pharmaceutical industry has long been one of the most innovativeindustries and, unlike industries such as computers and aircraft,has remained relatively unconcentrated. In recent years, however,there have been contrasting industry developments that couldhave far-reaching, long-run effects on the industry's structure.This paper examines the impact of the entry of new biotechnologyfirms, the increasing real cost of innovation, and the recentimportant mergers among leading firms. Also, a regression analysisreveals disproportionately high innovative contributions fromboth new biotechnology firms and the very largest multinationalpharmaceutical firms.