Overseas Acquisition versus Greenfield Foreign Investment: Which Internationalization Strategy is better for Indian Pharmaceutical Enterprises?
AbstractVery recently overseas acquisition and outward greenfield foreign investment have emerged as the two important modes of internationalization of the Indian pharmaceutical enterprises. This study examines the relative strengths and weaknesses of these strategies so as to suggest which between the two is a more effective internationalization strategy for the Indian pharmaceutical firms, given the nature of their ownership advantages. This analysis has been conducted in three stages. First, the nternationalization process of the Indian pharmaceutical industry has been embedded into a four stage theory emphasizing on the emergence of different modes of internationalization like inward foreign investment, imports, exports, outward greenfield investment, overseas acquisition and contract manufacturing including inter-firm strategic alliances. Second, theoretical perspectives have been developed with regard to the different ways in which greenfield investment and overseas acquisition can maximize the revenue productivity of pharmaceutical firms’ competitive advantages and/or to strengthen their competitive position. Third, case study of Ranbaxy Laboratories has been undertaken to empirically assess its experience with overseas acquisitions. The analysis indicates that the growth and internationalization of Indian pharmaceutical enterprises was critically dependent upon strategic government policies pursued in the past. The Indian experience offers a number of policy lessons to other developing countries wanting to build their domestic base in the pharmaceutical sector. Theoretical understandings indicate that acquisition is a more effective internationalization strategy than greenfield investment since the former not only provides all the benefits that the latter gives, but also several other competitive advantages important for firms’ performance in world market. The experience of Ranbaxy shows that overseas acquisitions have augmented its intangible asset bundle including distribution and market networks and have provided access to an existing market.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 12339.
Date of creation: Aug 2006
Date of revision:
Indian Pharmaceutical Industry; Foreign Investment; M&As; Trade; Strategic Alliances;
Other versions of this item:
- Jaya Prakash Pradhan & Abhinav Alakshendra, . "Overseas Acquisition Versus Greenfield Foreign Investment: Which Internationalization Strategy is better for Indian Pharmaceutical Enterprises?," Working Papers 0607, Institute for Studies in Industrial Development (ISID).
- L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology
- L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
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