The Role of Geographic Location in the Financial and Innovation Performance of Publicly Traded Pharmaceutical Companies: Empirical Evidence from the Untied States

Abstract

In this paper we examine the role of geographic location in the financial and innovation performance of publicly traded companies in the US pharmaceutical industry. Regional production clusters are identified and mapped. Particular attention is given to Porter's work on competitive advantage (the diamond paradigm) (Porter, 1990 The Competitive Advantage of Nations). Several metrics of business performance at the company level are collated with local factor conditions, the relative presence of related or supporting industries, and the degree of interfirm rivalry within production clusters (among other things). Our main hypothesis is that company performance responds positively to the location-specific assets identified by Porter. We explore this hypothesis using a series of t-tests and regression models based on secondary data. The empirical results lend partial support to Porter's model. Specifically, the data show that companies located within major clusters exhibit stronger financial performance than their counterparts located elsewhere. Cluster membership is also found to play a positive role in product innovation (as measured by patent counts). Overall, the data show that different metrics of company performance are influenced by different combinations of strategic and locational variables.