148 The Impact of the Act for the Development of Biotech and New Pharmaceuticals Industry on Firm Innovation in Taiwan the natural logarithm of 1+adjusted patent citations, LN (1+adjusted patent citation), as the dependent variable because a high proportion of the sample has a value of zero for the adjusted patent citations. To explain the adjusted patent citation, we use the natural logarithm of lagged net sales, lagged R&D expenditure, and lagged Tobin’s Q as control variables.25 The coefficient γ of interaction term, After t × Treatmenti is used to test whether the Biopharmaceutical Act changes innovation for approved biopharmaceutical firms. If the Biopharmaceutical Act improves innovation for approved biopharmaceutical firms, γ will be significantly positive. 4. Empirical Results 4.1 Summary Statistics Table 1 presents the descriptive statistics, including the mean and median of all variables, for the four groups. The approved biopharmaceutical firms include only the data of biopharmaceutical firms in the year of approval. The other three groups: unapproved biopharmaceutical firms, biopharmaceutical industry, and high-tech industry, comprise firm-year observations from 2007 to 2017. Table 1 Descriptive Statistics Variables Approved Biopharmaceutical Firms Unapproved Biopharmaceutical Firms Biopharmaceutical Industry High-tech Industry Mean Median Mean Median Mean Median Mean Median Patent 0.09 0.00 0.21 0.00 0.19 0.00 3.25 0.00 Adjusted Citation 0.04 0.00 0.09 0.00 0.08 0.00 1.07 0.00 R&D Expenditure 121.63 76.48 66.09 26.30 80.40 31.89 455.74 60.76 R&D intensity (%) 19.10 9.86 4.51 2.79 7.60 3.66 4.67 2.52 25 These control variables are incorporated into regressions following previous studies (Klassen, Pittman, Reed, and Fortin, 2004; Becker-Blease, 2011; Aghion et al., 2013; Chang et al., 2019). In addition, we consider the lagged effect for the patent adjusted citations because the innovation process takes time from the R&D input to patent application. Thus, following prior literature, we relate all control variables in year t-1 to patent adjusted citations in year t.

RkJQdWJsaXNoZXIy ODg3MDU=