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 (RD) 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 RD 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 RD activities, while economic freedom and GDP growth have a positive and significant impact on RD investment. The findings are especially important given the deleterious effects of corruption and may be useful for both managers and policy-makers.