NBER

Ji Min Park

Gies College of Business
University of Illinois at Urbana-Champaign
607 E Gregory Drive
Champaign, IL 61820

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: University of Illinois at Urbana-Champaign

NBER Working Papers and Publications

July 2020The Role of Assets In Place: Loss of Market Exclusivity and Investment
with Matthew J. Higgins, Mathias J. Kronlund, Joshua Pollet: w27588
We utilize a novel identification strategy to analyze the impact of assets in place on firms' decisions for future projects. We exploit the context in the pharmaceutical industry, where the loss of market exclusivity for a branded drug can be used to separate the impact of cash flows generated by a firm's current assets in place from the characteristics of its future investment opportunities. We first show that around the exclusivity losses in our sample of large drugs, the affected firms' profitability drop significantly. The timing of this profitability decrease was predetermined many years ago, and therefore, arguably independent of current investment opportunities. Nevertheless, we find that R&D spending drops by approximately 25% over two years following the loss of exclusivity. We al...

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