Innovation and corporate growth in the evolution of the drug industry

This work studies the processes of growth of the worlds top 150 pharmaceutical firms, on the grounds of an original database which also allows disaggregate analysis at the level of single therapeutical classes and chemical entities. Our findings show that the industry - whose long-term evolution is driven by innovation, imitation and permanent creation of new markets - displays (i) "fat tails" in the distribution of growth shocks, present at all levels of aggregation, with (relatively rare) big "spurs of growth", (ii) a significant autocorrelation of growth rates, (iii) a fall of variance of growth rates with size entirely dependent on corporate diversification patterns, in turn plausibly shaped by the "competence scope" of each firm, and (iv) different "lifecycles" of diverse types of products, and persistent forms of heterogeneity across firms in terms of innovative output, which, however, do not not seem to affect comparative growth performances. © Elsevier Science B.V.