Research and development productivity map: visualization of industry status

Decline in research and development (R&D) productivity and changes in the business environment have led to pharmaceutical company management to strive to improve R&D productivity. This decline is widely considered to be a major cause of industry consolidation and has received increased scholarly attention. This study aims to construct an R&D productivity map to visualize the industry's R&D productivity and to identify similarity in corporate actions with a view to investigate whether there is a relationship between deterioration in R&D productivity and industry consolidation.

Research and development productivity is decomposed into two subprocesses to measure productivity: R&D efficiency and R&D effectiveness, and scores were calculated using a two-stage data envelopment analysis (DEA). The map is then constructed by projecting outputs. To identify any relationship between DEA scores and merger and acquisition transactions, a multiple regression model is employed.

Data on 21 global pharmaceutical companies, statistical results indicated that companies with lower R&D efficiency scores were more likely to engage in consolidation. Three US companies that were least successful in terms of R&D effectiveness, as measured by our indicators, were either acquired or changed their business model.

The R&D productivity map is a useful means for visualizing productivity among companies. By grouping companies into four groups, behavioural commonalities can be observed. The R&D productivity map should be useful for monitor the industry's productivity and help to improve it.