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The Outsourcing of R&D through Acquisitions in the Pharmaceutical Industry

  • Matthew Higgins
  • Daniel Rodriguez

For acquisitions characterized by information asymmetries, we find evidence consistent with the proposition that acquirers are able to avoid the winner's curse. We examine the performance of acquirers of 160 biotechnology firms from 1994-2001 and find evidence that on average, the acquirers of biotech firms realize significant positive returns. These returns are positively correlated with acquirer access to information about the research and development activities at target firms and a superior negotiating position on the part of the acquirer. Further, we find that acquirers that use equity as payment realize significant positive returns.

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File URL: http://economics.emory.edu/home/assets/workingpapers/higgins_03_24_paper.pdf
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Paper provided by Department of Economics, Emory University (Atlanta) in its series Emory Economics with number 0324.

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Date of creation: Oct 2003
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Handle: RePEc:emo:wp2003:0324
Contact details of provider: Web page: http://economics.emory.edu/home/journals/
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  18. Bradley, Michael & Desai, Anand & Kim, E. Han, 1988. "Synergistic gains from corporate acquisitions and their division between the stockholders of target and acquiring firms," Journal of Financial Economics, Elsevier, vol. 21(1), pages 3-40, May.
  19. Mitchell, Mark L & Lehn, Kenneth, 1990. "Do Bad Bidders Become Good Targets?," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 372-98, April.
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