The Influence of Mergers and Acquisitions on Innovative Activity and Ordinary Shares` Price Dynamics of Pharmaceutical Companies

The problem of influence of M&A deals on innovative activity of merged companies is not as widely covered as the influence of such deals on financial performance. This problem is part of scientific debate called “Shumpeter-Arrow stalemate” concerning what is the main driver of innovation – concentration or competition. Existing studies show contradictory results: some researches show that M&A deals lead to increase in innovative activity but many authors point that M&A deals can suddenly decrease the development of new drugs. However, existing studies suffer from limited samples. Moreover, the problem of connection between market perception of M&A deal and the influence of deal on innovative activity is not sufficiently explored. These problems are essential for pharmaceutical industry for two reasons: firstly, because of higher frequency of M&A deals in comparison to other industries, secondly because the rate of innovative activity in pharmaceutical industry makes direct impact on level of healthcare. The punchline of this research is exploration of three main problems: the evaluation of market perception of M&A deals in pharmaceutical industry, the evaluation of influence of M&A deals on innovative activity of pharmaceutical companies, the evaluation of correlation between market perception of particular M&A deal and its influence on innovative activity. This research contributes to the analysis of pharmaceutical industry by proposing new method of valuation of innovative activity and by valuation of connection between market perception of M&A deals and the rate of the products development. The dataset of this research includes 113 M&A deals from 1997 to 2016 and the data including number of drugs on different stages of clinical trials and R&D expenditures. 5 hypotheses were checked in the research and obtained results provide an opportunity to highlight specific features of pharmaceutical industry and elaborate recommendations for authorities and traders.