Most studies highlight an ambiguous link between competitive dynamics and innovation in India, an exciting observation reflecting the issue’s complexity. This study explores the non-linear nexus between competition and innovation by considering foreign and domestic competition separately in Indian domestic pharmaceutical firms for 2000–2019. The Herfindahl–Hirschman index of market concentration is used to measure competitiveness, whereas R&D expenditure is used to measure innovation. The findings of this study indicate a U-shaped relationship between R&D and foreign market concentration. However, for neck-and-neck firms, this U-shaped relationship is presented by domestic concentration. This study suggests the significance of adopting a holistic approach to competition and investment promotion policies prioritizing innovation, collaboration and balanced competition in the Indian pharmaceutical industry.
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