Technology, Competition and the Time of Entry: Diversification Patterns in the Development of New Drugs Volume 3 Jena Economic Research Papers 2009-09-29 2009 2007 2009-078 diversification technological diversity relatedness competition R&D This paper empirically investigates the determinants of R&D diversification strategies in the drug industry. It enriches the existing literature by proposing to look at diversification factors, which reflect market and technological proximity of an R&D project towards other projects within a firm’s portfolio as well as R&D competition factors. Additionally, the characteristics of R&D in the market where a new potential product is developed affect future product choice. The analysis is performed for products-in-development data, merged with firms’ patents, which allows us to separate project proximity in market niches from technological proximity. The results of empirical estimation support an idea that R&D diversification is governed by the economies of scope as well as the escape competition motive. Moreover, it is found that competition rather than spillovers in the niche where an R&D project is developed defines firms’ decisions to diversify. jportal_jpjournal_00000016 2009-09-30T11:36:41.750Z 2010-12-17T11:54:08.810Z