Firm-Level Innovation and the Role of Political Capabilities: Evidence for the Pharmaceuticals Industry

The global debate on balancing incentives for innovation in the pharmaceutical industry and facilitating competition for greater access to affordable medicines and vaccines has intensified in the aftermath of the Covid-19 pandemic. Drug discovery and vaccine development are expensive processes involving significant research and development (R&D) costs. And while the economic fundamentals of incentivising innovation for the pharmaceutical industry are traditionally linked to patenting, several scholars have highlighted the inefficiencies and greater appropriation of the returns from R&D for private firms. In this paper, we investigate the relationship between R&D and patents in the pharmaceutical industry as knowledge-based competitive advantage. We compile a unique data set of 1,012 medium and large pharmaceutical firms globally from 2015 to 2021 to understand how firms leverage their political capabilities or processes and market-based activities that help to influence policy outcomes or acquire resources in increasingly complex supply chains in the context of high and uncertain environmental dynamism.