Julian KahlThe Impact of Mergers and Acquisitions on Performance and Innovation

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In recent years, the pharmaceutical industry has entered a period of profound structural change. Among the most crucial upheaval forces which are increasingly reshaping the competitive landscape in the pharmaceutical industry are the declining research and development productivity, rising costs of commercialization, dwindling product pipelines as well as rapid technological change. These challenges are placing increasing demands on firms to adapt, reconfigure and recreate their capabilities to guarantee survival in the marketplace. Mergers and acquisitions (M&As) represent a particularly widespread tool among pharmaceutical firms to remedy these challenges. However, empirical evidence of post-M&A performance and innovation suggests that most M&As fail to create value. A current research gap thus relates to the determinants of post-merger success.

This study investigates the determinants of post-acquisition performance and innovation in the North American pharmaceutical industry in the years 2005 – 2013. The results of this study indicate that pre-acquisition resource endowments of acquiring and target firms as well as technological and organizational proximity between merging firms are important drivers of post-merger performance. However, while technological and organizational proximity among acquiring and target firms seem to facilitate the realization of commercial synergies, they do not seem to be conducive to post-merger innovation. By contrast, the empirical findings reported in this study seem to suggest that acquirer’s absorptive capacity and organizational complementarities between merging firms may facilitate post-merger innovation.

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