The intra and inter-firm geography of EMNCs: India’s

pharmaceuticals

Rory HornerClark University

Graduate School of Geography

Presentation for ‘Emerging Multinationals’ conference at Copenhagen Business School, October 2008.

Layout Background/context Intra-firm

- How international are India’s big pharma? (sales)

- Are Indian pharma establishing operations abroad? (subsidiaries)

- How global are manufacturing and R&D? Inter-firm alliances

- How are Indian pharma using inter-firm alliances in their internationalisation?

Conclusions/future research

Developed countries (e.g. UNCTAD 2006)

2000s

Where does developing country-FDI locate?

1980s

Other developing countries(e.g. Kumar 1982, Wells 1983)

Developing-country FDI

From intra-firm to inter-firm

Traditional ‘intra-firm’ e.g. Vernon (1966), Dunning (1988)

Inter-firm linkagese.g. Mathews (2006)

Firm Total assets (Rs. Million)

Net sales (Rs. Million)

HQ location

Year established

Ranbaxy Laboratories 34 068.2 35 754.4 New Delhi 1961

Cipla 24 521.8 28 974.1 Mumbai 1935

Dr. Reddy’s Laboratories

31 860.1 20 058.5 Hyderabad 1984

Sun Pharmaceuticals Industries

32 107.6 16 815.5 Mumbai 1983

Aurobindo Pharma 21 106.3 13 698.7 Hyderabad 1986

Lupin 15 565.5 15 965.4 Mumbai 1968

Jubilant Organosys 14 484.4 13 849.1 Noida 1978

Orchid Chemicals and Pharmaceuticals

18 132.8 8734.6 Chennai 1992

Wockhardt 16 149.0 9600.3 Mumbai 1959

Nicholas Piramal India 11 627.1 14 062.8 Mumbai 1988

India’s ‘big pharma’

Source: Business World India’s “BW Real 500: India’s top companies” (2007). HQ location and year established are sourced from company websites and annual reports.

Reverse engineering

Dr Reddy’s: “We began in 1984 and, like some other players of that era in India, concentrated on strengthening reverse engineering capabilities to produce high quality bulk drugs and formulations at low costs, and sell them in the domestic market.

To ….

The importance of these skills cannot be exaggerated, for they created the technological foundations for your Company’s successful foray into the international generics market” (Dr. Reddy’s 2002).

How international are India’s big pharma?

0

20

40

60

80

100

2002 2003 2004 2005 2006 2007

Ranbaxy

Dr. Reddy’s

Cipla

Lupin

Sun Pharmaceuticals

Jubilant Organosys

Orchid

Wockhardt

Nicholas Piramal

Year

% o

f gro

ss r

even

ue f

rom

out

side

Indi

a

0

20

40

60

80

100

2002 2003 2004 2005 2006 2007

Ranbaxy

Dr. Reddy’s

Cipla

Lupin

Sun Pharmaceuticals

Jubilant Organosys

Orchid

Wockhardt

Nicholas Piramal

0

20

40

60

80

100

2002 2003 2004 2005 2006 2007

Ranbaxy

Dr. Reddy’s

Cipla

Lupin

Sun Pharmaceuticals

Jubilant Organosys

Orchid

Wockhardt

Nicholas Piramal

Year

% o

f gro

ss r

even

ue f

rom

out

side

Indi

a

0

20

40

60

80

100

2002 2003 2004 2005 2006 2007

Ranbaxy

Dr. Reddy’s

Cipla

Lupin

Sun Pharmaceuticals

Jubilant Organosys

Orchid

Wockhardt

Nicholas Piramal

Share of gross revenue from abroad for India’s largest pharmaceutical firms 2002→2007

Are Indian pharma establishing operations abroad?

0

10

20

30

40

50

60

70

80

90

100

Cipla

Nicholas Piramal

Orchid

Jubilant Organosys

Sun Pharmaceuticals

Lupin

Aurobindo Pharma

Wockhardt

Dr. Reddy’s

Ranbaxy

0

10

20

30

40

50

60

70

80

90

100

Cipla

Nicholas Piramal

Orchid

Jubilant Organosys

Sun Pharmaceuticals

Lupin

Aurobindo Pharma

Wockhardt

Dr. Reddy’s

Ranbaxy 0

10

20

30

40

50

60

70

80

90

100

Cipla

Nicholas Piramal

Orchid

Jubilant Organosys

Sun Pharmaceuticals

Lupin

Aurobindo Pharma

Wockhardt

Dr. Reddy’s

Ranbaxy

0

10

20

30

40

50

60

70

80

90

100

Cipla

Nicholas Piramal

Orchid

Jubilant Organosys

Sun Pharmaceuticals

Lupin

Aurobindo Pharma

Wockhardt

Dr. Reddy’s

Ranbaxy

0

10

20

30

40

50

60

70

80

90

100

Cipla

Nicholas Piramal

Orchid

Jubilant Organosys

Sun Pharmaceuticals

Lupin

Aurobindo Pharma

Wockhardt

Dr. Reddy’s

Ranbaxy 0

10

20

30

40

50

60

70

80

90

100

CiplaNicholas PiramalOrchidJubilant OrganosysSun PharmaceuticalsLupinAurobindo PharmaWockhardtDr. Reddy’sRanbaxy 0

10

20

30

40

50

60

70

80

90

100

Cipla

Nicholas Piramal

Orchid

Jubilant Organosys

Sun Pharmaceuticals

Lupin

Aurobindo Pharma

Wockhardt

Dr. Reddy’s

Ranbaxy

0

10

20

30

40

50

60

70

80

90

100

Cipla

Nicholas Piramal

Orchid

Jubilant Organosys

Sun Pharmaceuticals

Lupin

Aurobindo Pharma

Wockhardt

Dr. Reddy’s

Ranbaxy

0

10

20

30

40

50

60

70

80

90

100

Cipla

Nicholas Piramal

Orchid

Jubilant Organosys

Sun Pharmaceuticals

Lupin

Aurobindo Pharma

Wockhardt

Dr. Reddy’s

Ranbaxy

0

10

20

30

40

50

60

70

80

90

100

Cipla

Nicholas Piramal

Orchid

Jubilant Organosys

Sun Pharmaceuticals

Lupin

Aurobindo Pharma

Wockhardt

Dr. Reddy’s

Ranbaxy

0

10

20

30

40

50

60

70

80

90

100

Cipla

Nicholas Piramal

Orchid

Jubilant Organosys

Sun Pharmaceuticals

Lupin

Aurobindo Pharma

Wockhardt

Dr. Reddy’s

Ranbaxy

No

. o

f s

ub

sid

iari

es

0

10

20

30

40

50

60

70

80

90

100

Cipla

Nicholas Piramal

Orchid

Jubilant Organosys

Sun Pharmaceuticals

Lupin

Aurobindo Pharma

Wockhardt

Dr. Reddy’s

Ranbaxy

0

10

20

30

40

50

60

70

80

90

100

Cipla

Nicholas Piramal

Orchid

Jubilant Organosys

Sun Pharmaceuticals

Lupin

Aurobindo Pharma

Wockhardt

Dr. Reddy’s

Ranbaxy0

10

20

30

40

50

60

70

80

90

100

Cipla

Nicholas Piramal

Orchid

Jubilant Organosys

Sun Pharmaceuticals

Lupin

Aurobindo Pharma

Wockhardt

Dr. Reddy’s

Ranbaxy

0

10

20

30

40

50

60

70

80

90

100

Cipla

Nicholas Piramal

Orchid

Jubilant Organosys

Sun Pharmaceuticals

Lupin

Aurobindo Pharma

Wockhardt

Dr. Reddy’s

Ranbaxy0

10

20

30

40

50

60

70

80

90

100

Cipla

Nicholas Piramal

Orchid

Jubilant Organosys

Sun Pharmaceuticals

Lupin

Aurobindo Pharma

Wockhardt

Dr. Reddy’s

Ranbaxy

0

10

20

30

40

50

60

70

80

90

100

Cipla

Nicholas Piramal

Orchid

Jubilant Organosys

Sun Pharmaceuticals

Lupin

Aurobindo Pharma

Wockhardt

Dr. Reddy’s

Ranbaxy 0

10

20

30

40

50

60

70

80

90

100

Cipla

Nicholas Piramal

Orchid

Jubilant Organosys

Sun Pharmaceuticals

Lupin

Aurobindo Pharma

Wockhardt

Dr. Reddy’s

Ranbaxy

0

10

20

30

40

50

60

70

80

90

100

Cipla

Nicholas Piramal

Orchid

Jubilant Organosys

Sun Pharmaceuticals

Lupin

Aurobindo Pharma

Wockhardt

Dr. Reddy’s

Ranbaxy

0

10

20

30

40

50

60

70

80

90

100

Cipla

Nicholas Piramal

Orchid

Jubilant Organosys

Sun Pharmaceuticals

Lupin

Aurobindo Pharma

Wockhardt

Dr. Reddy’s

Ranbaxy 0

10

20

30

40

50

60

70

80

90

100

CiplaNicholas PiramalOrchidJubilant OrganosysSun PharmaceuticalsLupinAurobindo PharmaWockhardtDr. Reddy’sRanbaxy 0

10

20

30

40

50

60

70

80

90

100

Cipla

Nicholas Piramal

Orchid

Jubilant Organosys

Sun Pharmaceuticals

Lupin

Aurobindo Pharma

Wockhardt

Dr. Reddy’s

Ranbaxy

0

10

20

30

40

50

60

70

80

90

100

Cipla

Nicholas Piramal

Orchid

Jubilant Organosys

Sun Pharmaceuticals

Lupin

Aurobindo Pharma

Wockhardt

Dr. Reddy’s

Ranbaxy

0

10

20

30

40

50

60

70

80

90

100

Cipla

Nicholas Piramal

Orchid

Jubilant Organosys

Sun Pharmaceuticals

Lupin

Aurobindo Pharma

Wockhardt

Dr. Reddy’s

Ranbaxy

0

10

20

30

40

50

60

70

80

90

100

Cipla

Nicholas Piramal

Orchid

Jubilant Organosys

Sun Pharmaceuticals

Lupin

Aurobindo Pharma

Wockhardt

Dr. Reddy’s

Ranbaxy

0

10

20

30

40

50

60

70

80

90

100

Cipla

Nicholas Piramal

Orchid

Jubilant Organosys

Sun Pharmaceuticals

Lupin

Aurobindo Pharma

Wockhardt

Dr. Reddy’s

Ranbaxy

No

. o

f s

ub

sid

iari

es

0

10

20

30

40

50

60

70

80

90

100

Cipla

Nicholas Piramal

Orchid

Jubilant Organosys

Sun Pharmaceuticals

Lupin

Aurobindo Pharma

Wockhardt

Dr. Reddy’s

Ranbaxy

0

10

20

30

40

50

60

70

80

90

100

Cipla

Nicholas Piramal

Orchid

Jubilant Organosys

Sun Pharmaceuticals

Lupin

Aurobindo Pharma

Wockhardt

Dr. Reddy’s

Ranbaxy0

10

20

30

40

50

60

70

80

90

100

Cipla

Nicholas Piramal

Orchid

Jubilant Organosys

Sun Pharmaceuticals

Lupin

Aurobindo Pharma

Wockhardt

Dr. Reddy’s

Ranbaxy

0

10

20

30

40

50

60

70

80

90

100

Cipla

Nicholas Piramal

Orchid

Jubilant Organosys

Sun Pharmaceuticals

Lupin

Aurobindo Pharma

Wockhardt

Dr. Reddy’s

Ranbaxy

Res

t of

Asi

aEur

ope

North

Am

eric

a A

fric

aC

entr

al &

S

outh

A

mer

ica

Oce

ania

Subsidiaries locations 2002 and 2007

How global is manufacturing and R&D?

• Concentration in India

•More manufacturing than R&D abroad

•R&D focus in USA.

How are Indian pharma engaging in alliances and linkages?

Limited evidence of industry-government-university linkages

Inter-firm linkages have a distinct geography.

→ 93% with Non-Indian firms

→ 93% of those with North American or European firms

How are Indian pharma EMNCs engaging in inter-firm linkages? Classification of international inter-firm alliances of India’s top 10

pharma 2002- mid 2008

Manufacturing Marketing and distribution

R&D

Inward 24 35 6

Co/joint 0 5 22

Outward 0 19 4

Conclusions and future research Growing internationalisation, targeting the

regulated markets Proliferation of alliances, yet still strong intra-

firm advantage Sources of Indian advantage? Sustainable? How will internationalisation of these firms

evolve over time? Importantly, will these EMNCs effectively

serve the needs of the base of the economic pyramid?

Within India:

Within Western Europe and North America

Empirical focus: India’s pharmaceuticals

A ‘knowledge economy’ sector

Prominent in the internationalisation of Indian EMNCs

Pharmaceutical industry noted for being alliance-driven (e.g. Birch 2008)

Manufacturing by firm

R&D by firm

Alliances by chronology