title: Parallel imports and innovation in an emerging economy: the case of Indian pharmaceuticals.
abstract: This paper studies the impact of the re-importation of imitated pharmaceuticals as a by-product of an open policy toward parallel import (PI) on process innovation. Foreign investment by a firm to exploit a new unregulated market with weak intellectual property rights can give rise to imitation. These products can potentially re-enter the original country when PI is allowed influencing research and development (R&D) incentives. In an emerging economy with technologically heterogeneous firms, trade costs shift PI-related market share losses from the more to the less R&D efficient firm, inducing the former to strategically increase R&D. PI accompanied by tariffs also induces higher R&D effort by the technologically inferior firm when it results in an expansion of its sales abroad. A tariff on PI is most likely to increase welfare when the technological gap between the two firms at home is sufficiently large.
authors.affiliation: Department of Economics, University of Bologna, Bologna, Italy. a.mantovani@unibo.it
authors.forename: Andrea
authors.initials: A
authors.lastname: Mantovani
authors.forename: Alireza
authors.initials: A
authors.lastname: Naghavi
mesh_terms: D003132:Commerce; D004345:Drug Industry; D007194:India; D018973:Intellectual Property; D038622:Internationality; D004364:Pharmaceutical Preparations / Q000600:supply & distribution*; D012106:Research
chemical_list: D004364:Pharmaceutical Preparations