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Biopharmaceutical Alliances And Competition: A Real Options Games Approach

Author

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  • GIOVANNA LO NIGRO

    (University of Palermo, Viale delle Scienze, Palermo, Italy)

  • AZZURRA MORREALE

    (University of Palermo, Viale delle Scienze, Palermo, Italy)

  • SERENA ROBBA

    (University of Palermo, Viale delle Scienze, Palermo, Italy)

  • PAOLO ROMA

    (University of Palermo, Viale delle Scienze, Palermo, Italy)

Abstract

The competitive landscape where pharmaceutical and biotechnology companies operate has changed radically due to a scientific/technological progress that has revolutionised the process by which drugs are developed. In fact, pharmaceutical industry more and more relies on advances in biochemistry and molecular biology. As a consequence, the number of partnerships between pharmaceutical and biotech firms has grown significantly. Research contributions addressing the biopharmaceutical alliances design have also focused on the optimal timing to sign a partnership. In this paper, we introduce and analyse the effect of competition in biotechnology industry by modelling the decisions of whether and when ally with a pharmaceutical company through a real options game. We find that the timing decisions depend on the level of the competition, synergies obtained through the alliance and contract terms offered by the pharmaceutical company as well. Also, we show that the first mover might not always pre-empt the follower in partnering with the pharmaceutical company.

Suggested Citation

  • Giovanna Lo Nigro & Azzurra Morreale & Serena Robba & Paolo Roma, 2013. "Biopharmaceutical Alliances And Competition: A Real Options Games Approach," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 17(06), pages 1-22.
    • Handle: RePEc:wsi:ijimxx:v:17:y:2013:i:06:n:s1363919613400239
    DOI: 10.1142/S1363919613400239
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    Citations

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    Cited by:

    1. Morreale, Azzurra & Mittone, Luigi & Lo Nigro, Giovanna, 2019. "Risky choices in strategic environments: An experimental investigation of a real options game," European Journal of Operational Research, Elsevier, vol. 279(1), pages 143-158.
    2. Giovanna Lo Nigro & Azzurra Morreale & Lorenzo Abbate, 2016. "An Open Innovation Decision Support System to Select a Biopharmaceutical R&D Portfolio," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 37(6), pages 392-406, September.
    3. Roma, Paolo & Zambuto, Fabio & Perrone, Giovanni, 2014. "Price dispersion, competition, and the role of online travel agents: Evidence from business routes in the Italian airline market," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 69(C), pages 146-159.
    4. Lo Nigro, Giovanna, 2016. "The effect of early or late R&D inbound alliance on innovation," Journal of Business Research, Elsevier, vol. 69(5), pages 1791-1795.
    5. Morreale, Azzurra & Robba, Serena & Lo Nigro, Giovanna & Roma, Paolo, 2017. "A real options game of alliance timing decisions in biopharmaceutical research and development," European Journal of Operational Research, Elsevier, vol. 261(3), pages 1189-1202.
    6. Murray, Timothy & Garg, Jugal & Nagi, Rakesh, 2021. "Limited-trust equilibria," European Journal of Operational Research, Elsevier, vol. 289(1), pages 364-380.

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