How does the development level of the home country or region moderate the relationship between R&D and profitability in the pharmaceutical industry over time?

Sammanfattning

This study aimed to investigate the relationship between R&D intensity and profitability among pharmaceutical firms, especially how the economic development level moderates this relationship over time. The sample consisted of 255 firms, with panel data covering the period from 2015 to 2025. A firm fixed-effects regression analysis was conducted using ROA as the dependent variable, R&D intensity with time lags ranging from 0 to 8 years as the key independent variable, economic development level as the moderating factor. There were also several control variables controlling for firm-specific characteristics. The result suggests that the relationship between ROA and R&D becomes increasingly positive over time for the overall sample, as well as for developed subsamples, though for developing countries subsample, this relationship is positive but statistically insignificant. Furthermore, the findings suggest that the level of economic development in a firm’s home country or region moderates the relationship between R&D intensity and ROA in a statistically significant, non-linear way This study contributes to the literature by providing a context-sensitive and dynamic explanation for the relationship between R&D investment and profitability in the pharmaceutical industry. It highlights the importance of economies’ level of development in shaping the financial outcomes of R&D investment over time.