Tjandrawinata, Raymond R. and Simanjuntak, Destrina Grace (2012): Factors affecting productivity of research-based pharmaceutical companies following mergers and acquisitions.
Download (329Kb) | Preview
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.
|Item Type:||MPRA Paper|
|Original Title:||Factors affecting productivity of research-based pharmaceutical companies following mergers and acquisitions|
|Keywords:||Mergers and Acquisitions (M&A), R&D Expenditure, Profitability, Sales Revenue, R&D Intensity|
|Subjects:||D - Microeconomics > D2 - Production and Organizations > D21 - Firm Behavior: Theory
D - Microeconomics > D2 - Production and Organizations > D24 - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
|Depositing User:||Raymond Tjandrawinata|
|Date Deposited:||09. Nov 2012 19:20|
|Last Modified:||11. Feb 2013 23:58|
A Congressional Budget Office Study. 2006. Research and Development in the Pharmaceutical Industry. Congress of The United States, Congressional Budget Office.
Andras, Tina Larsen and Srini S. Srinivasan. 2003. Advertising Intensity and R&D Intensiy: Differences across Industries and Their Impact on Firm’s Performance. International Journal of Business and Economics, Vol.2, No. 2, 167-176.
Chao, Raul O. and Stylianos Kavadias (2009). R&D Intensity and NPD Portfolio. Charlottesville VA: University of Virginia, Darden School of Business. Atlanta GA: Georgia Institute of Technology, College of Management.
Danzon, Patricia M., Andrew Epstein, Sean Nicholson. 2003. Mergers and Acquisitions in the Pharmaceutical and Biotech Industries. The Wharton School, University of Pennsylvania. Health Care Systems Department; National Bureau of Economic Research (NBER).
Davidson, Larry and Gennadiv Greblov. 2005. The Pharmaceutical industry in the Global Economy. Indiana University Kelley School of Business, Bloomington, Indiana. Retrieved from: http://www.digibooks.cn/wwf/digibooks.cn/pharmaceutical-industry/PharmaceuticalIndustry/Medicine-Merchants/The-Pharmaceutical-industry-in-the-Global-Economy.html.
Griliches, Z. 1979. Issues in assessing the contribution of research and development to productivity growth. Bell Journal of Economics, 10(1), 92-116.
Gujarati, Damodar. 2003. Basic Econometrics Fourth Edition. McGraw-Hill.
Hall, Bronwyn H. 1988. The Effect of Takeover Activity on Corporate Research and Development. In Auerbach, Alan J., ed., Corporate Takeovers: Causes and Consequences. Chicago: University of Chicago Press. NBER Working Series Paper No. 2191.
Hundley, Greg, Carol K. Jacobson, Seung Ho Park. 1996. Effects of Profitability and Liquidity on R&D Intensity: Japanese and U.S. Companies Compared. Academy of Management Journal, Volume: 39, Issue: 6, Pages: 1659-74.
Jensen, Michael C. 1987. The Free Cash Flow Theory of Takeovers: A Financial Perspective on Mergers and Acquisitions and the Economy. Harvard Business School; Social Science Electronic Publishing (SSEP), Inc.; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI). Accepted Paper Series published on SSEP, Inc.
Kalb, Clifford. 2006. Mergers: Miracles or Madness?. Wood Mackenzie. Retrieved from: http://units.sla.org/division/dpht/meetings/spring2006/2006-kalb.pdf.
LaMattina, Jhon. L. 2011. The Impact of Mergers on Pharmaceutical R&D. Nature Review: Drug Discovery, Volume 10, 559-560.
Magoon, Krishan. 2011. M&A Review: Pharmaceutical & Biotechnology Industry, Mergers & Acquisitions Review 2005-2011 Pharma Biotech. Knol, A Unit of Knowledge. Retrieved from: http://knol.google.com/k/m-a-review-pharmaceutical-biotechnology-industry.
Martynova, Marina, Sjoerd Oosting, and Luc Renneboog. 2006. The long-term operating performance of European mergers and acquisitions. The University of Sheffield Management School. Tilburg University and ECGI. Working Paper Series published on SSEP, Inc. Retrieved from: http://maint.ssrn.com/?abstract_id=944407.
Rogers, Mark. 2001. The Influence of Diversification and Market Structure on the R&D Intensity of Large Australian Firms. Harris Manchester College, Oxford University and Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
Scherer, F.M. 2001. The Link Between Gross Profitability and Pharmaceutical Spending. Health Affairs 20(5), 216-220.
Shantikumar, Swetha. 2009. The M&A Trend Continues: An Analysis of the Key Mergers and Acquisitions of 2009. Frost & Sullivan Market Insight. Retrieved from:http://www.frost.com/prod/servlet/market-insight-top.pag?docid=185479087.
Shields, Marie. 2011. Money for Nothing. Next Generation Pharmaceutical. Retrieved from: http://www.ngpharma.com/article/Money-for-Nothing.
Simanjuntak, Destrina Grace and Raymond R. Tjandrawinata. 2011. Factors Influencing Sales Revenue in the Multinational Pharmaceutical Companies. Department of Business Development, Dexa Medica Group, Tangerang, Indonesia. Retrieved from: http://maint.ssrn.com/?abstract_id=1898071.
Simanjuntak, Destrina Grace and Raymond R. Tjandrawinata. 2011. Impact of Profitability, R&D Intensity, and Cash Flow on R&D Expenditure in Pharmaceutical Companies. Department of Business Development, Dexa Medica Group, Tangerang, Indonesia. Retrieved from: http://maint.ssrn.com/?abstract_id=1824267.
Simanjuntak, Destrina Grace and Raymond R. Tjandrawinata. 2011. M&A of Generic Pharmaceutical Companies Increases Productivity. Department of Business Development, Dexa Medica Group, Tangerang, Indonesia. Retrieved from: http://maint.ssrn.com/?abstract_id=1946761.
Tjandrawinata, Raymond and Destrina Grace Simanjuntak. 2012. The Impact of Mergers and Acquisitions in Research-Based Pharmaceutical Companies on Productivity. Department of Business Development, Dexa Medica Group, Tangerang, Indonesia. Retrieved from: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1981889.
Vernon, John A., Joseph H. Golec, Randal Lutter, and Clark Nardinelli. 2006. FDA New Drug User Fees, and R&D Spending. AEI-Brooking Joint Center For Regulatory Studies Working Paper 06-21.