Upstream innovation effect of downstream competition: How Does Volume-based Procurement Shape Pharmaceutical Innovation Strategies?

This study examines how volume-based procurement policies reconfigure innovation trajectories in pharmaceutical enterprises from a knowledge-based perspective. Analysing panel data from listed pharmaceutical companies, this research shows that this procurement mechanism triggers a strategic recombination of knowledge assets, fundamentally altering innovation priorities and resource allocation patterns. The principal theoretical contribution emerges from identifying a dual-path response mechanism that procurement pressures stimulate firms’ R&D investment while simultaneously promoting knowledge-intensive innovation restructuring. Specifically, enterprises reallocate innovation resources away from low-value and repetitive patenting towards higher-quality innovation activities, reflecting distinct knowledge recombination strategies under policy-induced constraints. Methodologically, this research introduces a novel framework for assessing innovation strategy reorientation through multidimensional indicators, including patent portfolios, strategic patent withdrawal behaviour, knowledge recombination, and original innovation capacity. The empirical results show heterogeneous responses across enterprises, with research intensity and market positioning functioning as critical moderating factors. This research offers strategic implications for pharmaceutical enterprises navigating policy-driven market transformations and contributes towards innovation and upgrading of the pharmaceutical industry.