Asian Journal Of Social Pharmacy

Abstract: Objective To analyze the relationship between the profitability of pharmaceutical enterprises of different scales and their R&D investment. Methods The data of China’s pharmaceutical manufacturing industry from 1995 to 2016 were selected to establish a vector auto-regression mode, and then an impulse response function and variance decomposition were used to analyze the data. Results and Conclusion For large-scale pharmaceutical enterprises, 1% increase in R&D input will lead to 0.792% increase of their main business profit. For medium-sized enterprises, if their main business profit increases by 1%, their R&D input will increase by 0.965%. Therefore, if their R&D input increases by 1%, their main business profit will increase by 1.036%. The improvement of the profitability of large-scale pharmaceutical enterprises cannot promote the increase of R&D capital investment. But the increase of profitability from medium-sized enterprises can promote the increase of R&D capital investment. As a result, the increase of R&D capital investment of large and medium-sized enterprises can improve corporate profitability.

Key words: pharmaceutical enterprises, profitability, R&, D investment, vector auto-regression (VAR) mode