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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.

Suggested Citation

  • Tjandrawinata, Raymond R. & Simanjuntak, Destrina Grace, 2012. "Factors affecting productivity of research-based pharmaceutical companies following mergers and acquisitions," MPRA Paper 42514, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:42514
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    References listed on IDEAS

    as
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    3. Zvi Griliches, 1998. "Issues in Assessing the Contribution of Research and Development to Productivity Growth," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 17-45, National Bureau of Economic Research, Inc.
    4. Martynova, M. & Oosting, S. & Renneboog, L.D.R., 2006. "The Long-Term Operating Performance of European Mergers and Acquisitions," Discussion Paper 2006-111, Tilburg University, Center for Economic Research.
    5. 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, June.
    6. Patricia M. Danzon & Andrew Epstein & Sean Nicholson, 2007. "Mergers and acquisitions in the pharmaceutical and biotech industries," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(4-5), pages 307-328.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Mergers and Acquisitions (M&A); R&D Expenditure; Profitability; Sales Revenue; R&D Intensity;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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