title: Pharmaceutical regulation in Europe and its impact on corporate R&D.
abstract: OBJECTIVE
  Many European countries regulate the markets for prescription drugs in order to cope with rising health expenditures. On the other hand, regulation distorts incentives to invest in pharmaceutical R&D. This study aims at empirically assessing the impact of regulation on pharmaceutical R&D expenditures.
  
  
  METHODS
  We analyze a sample of 20 leading pharmaceutical companies between 2000 and 2008. The share of sales in Europe serves as a proxy for the degree of pharmaceutical regulation. We control for other firm specific determinants of R&D such as cash flow, company size, leverage ratio, growth rate, and Tobin's q.
  
  
  RESULTS
  Our results suggest a nonlinear relationship between European sales ratio and R&D intensity. Beyond a threshold of 33% of sales generated in Europe, a higher presence in Europe is associated with lower R&D investments.
  
  
  CONCLUSIONS
  The results can be interpreted as further evidence of the deteriorating effect of regulation on firm's incentives to invest in R&D.
authors.affiliation: Medical University of Vienna, Spitalgasse 23, Vienna, 1090, Austria, stephan.eger@hotmail.com.
authors.forename: Stephan
authors.initials: S
authors.lastname: Eger
authors.forename: Jörg C
authors.initials: JC
authors.lastname: Mahlich