The importance of being first. The case of prescription drugs in Canada

Abstract

There is a growing literature on the importance of being first, which suggests that where there is uncertainty about the product quality of late entrants' brands the pioneering brand will retain a competitive advantage. This is consistent with studies of the U.S. drug industry. Using Canadian data for the drug industry it is shown that eliminating quality differences is a necessary but not sufficient condition for late entrants to gain market share. In addition, price competition has to be stimulated. Under these conditions the late entrants have taken up to 100 percent of the pioneering brands market. © 1986.