Macroeconomic factors, liquidity issues and research and development investments: empirical evidence from the EU pharmaceutical industry

In recent decades, the business landscape is influenced by corruption, a pervasive phenomenon, faced by all countries, irrespective of their stage of development. The pharmaceutical industry is recognized as a “fertile ground” for corrupt practices. The paper aims to investigate the impact of corruption, economic freedom, and gross domestic product (GDP) growth on research and development (R&D) investment using a dataset of European Union (EU) pharmaceutical companies from 2011 to 2019. It also investigates the moderating effect of liquidity issues on the relationship between corruption and R&D investment. The study employs a quantitative approach using fixed effects models. Results show that corruption has a negative influence on pharmaceutical firms’ decision to undertake R&D activities, while economic freedom and GDP growth have a positive and significant impact on R&D investment. The findings are especially important given the deleterious effects of corruption and may be useful for both managers and policy-makers.