Raine Hermans

Price-cost margin in the pharmaceutical industry

This contribution estimates the price-cost margin in the Finnish pharmaceutical industry. The estimation is based on the method developed by Hall who shows that under constant returns to scale total factor productivity growth depends on the growth of output-capital ratio if the market is imperfectly competitive. Measurement of the price-cost margin is based on this theoretical result. We utilize data on the Finnish pharmaceutical industry. The data cover the years 1975–1999 and include information on output, labor hours, and capital stock. The results show that the estimated price-cost margin is in the range 0.59–0.67, which is close to the estimates obtained in the United States market.

Patent citations indicating present value of the biotechnology business

In this paper our aim is to assess the potential of using patent statistics in predicting the future sales anticipations and present value of a company active in the science-based industry. Instead of using conventional patent and patent application counts as indicators, we constructed patent citation weighted portfolios for each company. This way the heterogeneity of patents can be taken into account. Our data covers biotechnology patents held by Finnish biotechnology companies. Empirical results imply that particularly backward citations are related to present value estimations of the companies. In contrast to some previous studies, forward citations do not seem to predict the present value estimations. The findings provide some important implications on interpreting the significance of patent citations regarding valuation of science-based companies, and planning technology and innovation policies.

Funding intellectual-capital-abundant technology development: empirical evidence from the Finnish biotechnology business

This study takes an interdisciplinary approach to answering the questions of whether and how the intellectual capital (IC) of a company is related to its financial structure. To this end, we consecutively apply factor and regression analyses on a sample of 65 small and medium-sized Finnish biotechnology companies. Based on the results, we find that firms with a well-balanced IC base finance their operations to a larger extent with retained earnings and debt while companies with less well-balanced IC bases revert to other sources of financing, for example, external equity. Utilizing the conventional pecking order theory as a theoretical backdrop on one hand and recent results from its empirical research on the other, we present two alternative rationales behind deviating capital structure choices made by companies with dissimilar IC bases.

Measuring intellectual capital and sources of equity financing - value platform perspective within the Finnish biopharmaceutical industry

The aim of this study is to create a theoretically derived basis for measuring intellectual capital within the Finnish biopharmaceutical industry, and to relate these measures to ownership structures. Our empirical model employs survey data from small and medium-sized Finnish biopharmaceutical companies. The sources of equity financing are identified and the means of measuring Intellectual Capital (IC) in the value platform framework is created. Various sources of financing are related to the intellectual capital and other characteristic features of these companies. The biotechnology company owned by another firm is distinctive, corresponding to different strategic functions designated to the company by the owner firm. The largest investor group, venture capital companies, seem to prefer a well-balanced combination of intellectual capital. The other owner groups showed among themselves a rather similar pattern of investment preferences.

Projected growth effects of the biotechnology industry in Finland: the fourth pillar of the economy?

This study assesses the impact of the Finnish biotechnology industry on economic growth in Finland. The study employs official data from Statistics Finland and new survey data covering 84 Finnish biotechnology companies. An econometric forecast for the economy-wide growth impact of the biotechnology industry in Finland is presented. In the estimation procedure, this study employs the survey data both in forming growth anticipations within a new emerging industry and assessing inter-industrial growth effects. Applied Monte Carlo simulations predict that the contribution of the biotechnology industry to annual GDP growth in 2002–2006 will be in the range of 0.05–0.09 percentage points per annum with a probability of 90%. These results imply that it will take decades rather than years for the biotechnology industry to become a fourth pillar of the Finnish economy beside the forest industry, the metal products and machinery industry, and the electronics industry.