Adaptive strategies in the Indian pharmaceutical industry

Abstract

How do firms react when an industry faces increased competitive pressures due to trade liberalisation? Firms are believed to bring about changes in their technology, marketing and organisation by reorganisation and redeployment of resources, often through exit process (Buffie and Spiller 1986, Ross 1988). Pavitt's (1990) analysis of technological opportunity and innovations, Ettlie and Bridges's (1982) analysis of environmental uncertainty and its impact on technological performance seem to support this. Many research results have observed that environment can affect firms' strategies (Jemison 1981, McArthur and Nystrom 1991), and under conditions of increased uncertainty firms employ innovative strategies (Paine and Anderson 1977). However, evaluations are not so clear in a science-based industry such as Pharmaceuticals, especially if it is an oligopolistic domestic industry and imports are only imperfect substitutes for local production. Innovations are endogenous to the science-based industries and the form's have high technological options: one of diversifying into horizontal related products or altering the basic technological platforms themselves (Pavitt, 1990). This paper looks at adaptive behaviour oif the Indian pharmaceutical firms during the period of trade liberalisation.