Mergers and innovation: the case of the pharmaceutical industry
Mergers and innovation: the case of the pharmaceutical industry
This paper takes a new look at the effects of mergers on innovation by analysing the relationship between ex-ante technological (and product) relatedness of acquirers and targets and post-merger performances. The analysis is conducted using data on consolidations in the pharmaceutical industry for the period 1988-2004. Empirical results show that merger deals are more likely to be signed between firms with related technologies and drug portfolio. I .find that merged companies have on average, worst performances than the group of non-merging firms and that, contrary to what may be the common wisdom, higher levels of technological relatedness are associated with poorer performances. Finally, consolidations between large pharmaceutical companies seem to have a detrimental impact on the incentives of competitors to undertake research in those therapeutic areas where both acquirer and target are active players.
University of Southampton
Ornaghi, Carmine
33275e47-4642-4023-a195-39c91d0146b0
2006
Ornaghi, Carmine
33275e47-4642-4023-a195-39c91d0146b0
Ornaghi, Carmine
(2006)
Mergers and innovation: the case of the pharmaceutical industry
(Discussion Papers in Economics and Econometrics, 605)
Southampton, UK.
University of Southampton
Record type:
Monograph
(Discussion Paper)
Abstract
This paper takes a new look at the effects of mergers on innovation by analysing the relationship between ex-ante technological (and product) relatedness of acquirers and targets and post-merger performances. The analysis is conducted using data on consolidations in the pharmaceutical industry for the period 1988-2004. Empirical results show that merger deals are more likely to be signed between firms with related technologies and drug portfolio. I .find that merged companies have on average, worst performances than the group of non-merging firms and that, contrary to what may be the common wisdom, higher levels of technological relatedness are associated with poorer performances. Finally, consolidations between large pharmaceutical companies seem to have a detrimental impact on the incentives of competitors to undertake research in those therapeutic areas where both acquirer and target are active players.
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Published date: 2006
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Local EPrints ID: 39653
URI: http://eprints.soton.ac.uk/id/eprint/39653
PURE UUID: d0b36471-2cc1-4437-afc4-36725dc26060
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Date deposited: 29 Jun 2006
Last modified: 16 Mar 2024 03:42
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