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Factors affecting productivity of research-based pharmaceutical companies following mergers and acquisitions

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  • Tjandrawinata, Raymond R.
  • Simanjuntak, Destrina Grace

Abstract

This paper analyzes the impact of mergers and acquisitions (M&A) activities in research-based pharmaceutical companies, specifically the impact of R&D expenditure, profitability, and sales revenue on firms’ productivity, R&D intensity, in pharmaceutical industries following M&A activities. The model was estimated using annual data, gathered from seven large research-based pharmaceutical companies pre and post-M&A, during the period 2003 until 2010. The regression analysis method uses a fixed effect method with generalized least square (GLS) analysis. The result further shows that following M&A activities, firms’ one-year lagged R&D expenditure (t-1) and lagged profitability (t-1) to be positive in increasing significantly the firms’ amount of R&D intensity in research-based pharmaceutical industries, while, surprisingly firms’ one-year lagged sales revenue (t-1) have a negative impact in increasing significantly the firms’ amount of R&D intensity in research-based pharmaceutical industries.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 42514.

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Date of creation: Nov 2012
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Handle: RePEc:pra:mprapa:42514

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Related research

Keywords: Mergers and Acquisitions (M&A); R&D Expenditure; Profitability; Sales Revenue; R&D Intensity;

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  1. Patricia M. Danzon & Andrew Epstein & Sean Nicholson, 2004. "Mergers and Acquisitions in the Pharmaceutical and Biotech Industries," NBER Working Papers 10536, National Bureau of Economic Research, Inc.
  2. Zvi Griliches, 1979. "Issues in Assessing the Contribution of Research and Development to Productivity Growth," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 92-116, Spring.
  3. Mark Rogers, 2002. "The Influence of Diversification and Market Structure on the R&D Intensity of Large Australian Firms," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 35(2), pages 155-172.
  4. Trina Larsen Andras & Srini S. Srinivasan, 2003. "Advertising Intensity and R&D Intensity: Differences across Industries and Their Impact on Firm's Performance," International Journal of Business and Economics, College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 2(2), pages 167-176, August.
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