Comparison of external R&D and internal R&D: Based on the perspective of S&T development of China’s pharmaceutical manufacturing industry

Abstract

Purpose The science and technology (S&T) innovation in China’s pharmaceutical industry has entered a bottleneck. The choice between external and internal research and development (R&D) has become a significant challenge for S&T development. To provide scientific suggestions for companies to choose an R&D strategy and enhance S&T development, we analyzed and compared the impacts of two R&D strategies on S&T output. Methods We selected the data related to China’s pharmaceutical manufacturing industry from 2000 to 2019, established regression equations by the E-G two-step method, and used the VAR model for impulse responses and variance decompositions to research the relationship between two R&D strategies and S&T output. Results There is a stable long-term equilibrium relationship between two R&D strategies, including external and internal R&D, and S&T output in China’s pharmaceutical manufacturing industry. When internal R&D increases by 1%, S&T output increases by 0.7382% with a 5-year lag. When S&T output increases by 1%, external R&D increases by 2.0749% with a 2-year lag. Conclusion Compared with external R&D, internal R&D can boost S&T output.