Did Mergers & Acquistions replace R&D in the past?

• In Event: SESSION 1D: Financial Reporting

Abstract

The Wall Street Journal reported in April 18, 2012 that some Pharmaceutical companies are using mergers and acquisitions as a way to increase their R & D for new products. Today’s high cost of R & D in the pharmaceutical industry, to bring a new drug to market, gives firms an incentive to buy another company for their R & D that is already in process, rather than produce their own products. This paper uses a framework for high-tech firms, such as pharmaceuticals first proposed by Chandler 1990 and data from the Compustat database to investigate firms before 1988 to see if this was a strategy used by firms in the past to purchase R & D instead of developing their own products.

Author

• george l Schmidt, University of Arkansas Fort Smith