Motives for Acquisitions and the Effects of Acquisitions on Innovation Performance: A Look at the Pharmaceutical Industry
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Helsinki University of Technology |
Diplomityö
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Date
2005
Department
Major/Subject
Yritysstrategia ja kansainvälinen liiketoiminta
Mcode
TU-91
Degree programme
Language
en
Pages
82
Series
Abstract
Acquisitions have been a popular strategy for corporate growth. Their motivations and consequences have been studied extensively in the academic arena. A few empirical studies have evaluated the importance of motives for particular types of acquisitions. Consequences have focused on post-acquisition economic and innovation performance of the combined firm. Some have focused on the effects of acquisition characteristics, such as strategic and organizational fit, on the innovation performance. This thesis contributes to the current body of literature on corporate acquisitions by studying the acquisition motives of large pharmaceutical firms and by examining the effects of strategic and organizational fit of acquisitions on acquirer innovation performance. The pharmaceutical industry was chosen as a target of study because it has gone through vast consolidation recently. It is also dependent on innovation but has been seen to perform poorly in it. The possible reasons for this are examined. Based on a literature review, the acquisition motivations and their importance for each type of acquisition were identified in order to form a framework for studying the acquisition motives of pharmaceutical firms. Literature on innovation performance was used to form the hypotheses tested using regression analysis. The initial sample consisted of the 100 largest pharmaceutical firms chosen according to their 1989 sales. There are two separate parts which are analyzed in this study. One covers all the distinct acquisitions made by the sample companies between the years 1989-2003. There were a total of 236 acquisitions made by the sample firms in this period. These were used to analyze the major acquisition motivations in the pharmaceutical industry. The other part analyzes each sample company and the acquisitions that they had undergone between the years 1989-2003. These firms were used to study the effects of acquisition characteristics on acquirer technological performance. For this part of the analysis, the initial sample of 100 firms reduced down to 26 firms because some of the sample companies did not have any patent applications during the chosen years. The results on acquisition motivations show that extending product lines has been lately the most important in the pharmaceutical industry. The findings of the regression analysis reveal several things. Acquisitions do not necessarily cause a decline in innovative performance. This happens when the acquisition target is small relative to the acquirer. In this case, the acquirer can easily integrate the target to itself without disrupting its R&D activities. Also, it was shown that companies that are highly motivated in increasing their R&D scale perform better in innovation. The results have important contributions to the research on acquisitions and innovation performance. In addition, the findings have important implications for managers focused on enhancing their companies' innovative performance.Description
Supervisor
Laamanen, TomiThesis advisor
Schildt, HenriKeywords
acquisitions, motives, innovation performance, strategic fit, organizational fit, pharmaceutical industry
