Patent Activity and Financial Performance of Publicly Traded Companies in the U.S. Pharmaceutical Industry: The Role of Local Economic Conditions

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Abstract
This article looks at the spatial distribution of patent activity among publicly traded companies in the U.S. pharmaceutical industry. Data for two time periods show that patent introductions tend to favor the Northeast. Significant locational variations are uncovered in the innovation performance of firms in this industry. These variations are hypothesized to reflect the localized economic conditions that characterize Porter’s model of competitive advantage (the diamond paradigm). Our analysis suggests that patent counts respond positively to the degree of spatially concentrated production (density of competition). Furthermore, findings suggest that local business conditions play an important role in the innovation and financial performance of U.S. pharmaceutical companies.

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