Spend it Wisely: Market and Non-market Strategies in the Development of New Drugs

Pharmaceutical firms are top lobbying spenders in the United States (US). While the potential strategic benefits of lobbying are recognized in the literature, the criticism against unethical aspects of lobbying warrants pharmaceutical firms to strategize their lobbying activities. Our study addresses the question “How do market and non-market strategies interact in the context of new drug launches?” Specifically, we investigate the interaction between lobbying and the intellectual capital (human, structural, and social capital) of firms. We use a formal model to develop our hypotheses, which we test on a sample of the largest US-listed pharmaceutical firms between 1999 and 2021. Our analysis suggests a substitutive relationship between a firm’s human and structural capital and lobbying and complementary relationship between a firm’s social capital and lobbying.