Are Research and Development Processes Independent in the Pharmaceutical R&D?

Blockbusters have become internal resource of pharmaceutical companies for competitive advantage. This article divides the pharmaceutical R&D into two processes: The research process and the development process. Based on the RBV theory with VRIO framework, we argue that it is better to analyze the performance of the development process rather than the research outcome in order to determine the relation between innovation and the proprietary firms' activity. As an outcome index of the drug development process, the number of blockbusters is utilized. Our result of simultaneous estimation of patent and blockbuster equations are summarized as follows: (i) The development process is much more affected by the company scale than the research process is; (ii) The empirical effect of patents on the number of blockbuster is small compared to the scale elasticity on the development output.