The Impact of Import Substitution Policy on International Pharmaceutical Companies' FDI in Emerging Markets (by the Example of Russia)

Emerging markets are lucrative for pharmaceutical companies, as they have comparatively high growth rate, competition on the market is not yet high and technological advancement of national companies does not let them compete with foreign players. At some point an emerging market becomes dependent on pharmaceutical imports, domestic production facilities deteriorate, and it becomes evident for the government that such situation jeopardizes national health security. At this point, there is high probability that import substitution policy will be implemented. Given the interest of pharmaceutical companies to retain the market share, and government's concern to upgrade production capabilities inside the country, FDI during the period of import substitution is of interest for our research. In this work we analyze how import substitution policy influences the inflow of pharmaceutical companies' FDI in emerging markets by the example of Russian pharmaceutical industry.