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Mergers and innovation in big pharma

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  • Ornaghi, Carmine

Abstract

The aims of this paper are to study the effects of mergers on the R&D activity of consolidated firms and to explore the relationship between ex-ante relatedness of merging parties and their ex-post performances. The analysis is conducted using data of the pharmaceutical industry for the period 1988-2004. The empirical results suggest that merged companies have on average, worse performances than the group of non-merging firms. This result is confirmed when I account for the endogeneous formation of mergers by selecting a control group first using the propensity score method and then taking into account the technological relatedness of the firms. Finally, I find that higher levels of technological relatedness are not associated with better R&D outcomes.

Suggested Citation

  • Ornaghi, Carmine, 2009. "Mergers and innovation in big pharma," International Journal of Industrial Organization, Elsevier, vol. 27(1), pages 70-79, January.
  • Handle: RePEc:eee:indorg:v:27:y:2009:i:1:p:70-79
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