165 NTU Management Review Vol. 31 No. 2 Aug. 2021 always have higher innovation quality (i.e. adjusted patent citations) than the unapproved firms. In addition, in both Panel B.1 and B.2, the coefficients of the interaction term, After×Treatment, are not significant. These results show that for both low and high R&D intensity firms, the Biopharmaceutical Act does not have any effect on the innovation quality. In sum, the results from pharmaceutical and low R&D intensity firms help to explain the influence of the Biopharmaceutical Act on R&D investment. These two subsample findings may have similar economic implications because Yang et al. (2012) find that pharmaceutical firms usually have low R&D intensity.28 The pharmaceutical firms are more likely to have more serious R&D underinvestment than non-pharmaceutical firms because of higher risks and fewer successful cases of new medicine research, long periods required for innovations, and substantial investment necessaries. In addition, low R&D intensity firms tend to have greater R&D underinvestment. Thus, these findings for pharmaceutical and low R&D intensity firms imply that the firms with more serious R&D underinvestment problems receive greater encouragement from the Biopharmaceutical Act. 4.4 Inter-industry Analysis To exami ne whe t he r t he Bi opha rmaceu t i ca l Ac t i s e ff ec t i ve on l y for biopharmaceutical firms rather than other industries, we choose the high-tech industry as the control industry because high-tech industry also has R&D intensity as high as that of biopharmaceutical firms in Taiwan. 4.4.1 Difference-in-differences Estimator (DID Estimator) Table 7 presents the DID estimator of innovation for the inter-industry analysis. We also consider the possible continuous effect of the Biopharmaceutical Act and incorporate different time interval analyses in this table. Panel A and B present the DID estimator of the R&D investment and adjusted patent citations, respectively. 28 According to Yang et al. (2012), pharmaceutical firms usually have low R&D intensity because pharmaceutical firms generally produce generic drugs rather than patent drugs in Taiwan.
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