Efficiency Analysis of Indian Pharmaceutical Companies in the Post-TRIPS and Post Product Patent Regime using Stochastic Frontier Approach

Aas Mohammad
Bandi Kamaiah
JEL codes: 
L23 - Organization of Production, L25 - Firm Performance: Size, Diversification, and Scope, L52 - Industrial Policy; Sectoral Planning Methods, L65 - Chemicals; Rubber; Drugs; Biotechnology.
This paper analyses the technical efficiency of Indian pharmaceutical industry using the parametric technique; stochastic frontier analysis (SFA) for the period of 1997-2011 which covers both post TRIPS and post product patent period. The results of the study indicate the dominance of raw material in producing the firms’ outputs. Labour as an input variable has emerged as the most significant variable influencing the profit of the firms. There are considerable evidences that the observed outputs are less than their respective potential outputs due to technical inefficiency of firms. The results of the study are very important for the companies to realize their potential output and in dictating their survival and growth in the industry.
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