Business group effects on the innovation-internationalization relationship: Evidence from the Indian Pharmaceutical Sector

We combine insights from the strategic management and international business literatures in order to explore the moderating role of business groupcharacteristics on the link between innovation and internationalization in the context of the pharmaceutical sector in India. We test our three hypotheses on a sample of 219 Indian pharmaceutical firms affiliated with business groups, over a five-year period (2005-2010) in a panel of 1,096 firm-year observations. Results indicate that, contrary to our contention, research expenditure is negatively associated with export intensity, implying that firms in the Indian pharmaceutical sector may face a trade-off between investing in innovation and international expansion. As expected, business group characteristics significantly impact the strength of the relationship between innovation and internationalization. Theoretical and practitioner implications are discussed.