Competition and R&D Financing: Evidence from the Biopharmaceutical Industry

Richard T. Thakor, Andrew W. Lo

Research output: Contribution to journalArticlepeer-review


The interaction between product market competition, R&D investment, and the financing choices of R&D-intensive firms on the development of innovative products is only partially understood. We hypothesize that as competition increases, R&D-intensive firms will: (1) increase R&D investment relative to existing assets in place; (2) carry more cash; and (3) maintain less net debt. Using the Hatch-Waxman Act as an exogenous shock to competition, we provide causal evidence supporting these hypotheses through a difierences-in-difierences analysis that exploits difeerences between the biopharma industry and other industries, and heterogeneity within the biopharma industry. We also explore how these changes afect innovative output.

Original languageEnglish (US)
JournalJournal of Financial and Quantitative Analysis
StateAccepted/In press - 2021
Externally publishedYes

Bibliographical note

Publisher Copyright:
© The Author(s), 2021.


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