- Volume 18 Issue 7
DOI QR Code
The Impact of Alliance on Market Value of the Bio-pharmaceutical Firm in Korea
국내 제약·바이오기업들의 제휴가 기업의 시장가치에 미치는 영향
- Kwon, Haesoon (School of Management of Technology, Sungkyunkwan University) ;
- Lee, Heesang (School of Management of Technology, Sungkyunkwan University)
- Received : 2017.01.03
- Accepted : 2017.07.07
- Published : 2017.07.31
This paper analyzed the impact of alliances on the market value of the 106 bio-pharmaceutical companies listed on the KOSPI or KOSDAQ in Korea by using the 'Event study methodology'. Although general alliances did not impact the corporate value significantly, in the analysis corresponding to the alliance type, R&D alliances created positive value, as technology acts as an important factor for the alliance. Among the R&D alliances, 'Technology Transfer alliances', in particular 'Development Technology Transfer alliances', had a positive influence on the corporate value. We interpret these differentiated results as market tends to screen for types of alliances. Meanwhile, we confirmed that the possibility of a stock price increase before the alliance announcement is high by analyzing the impact of the timing of corporate alliance announcements on the company value. It can be inferred that the possibility of information leakage is high. This paper analyzes the impact of alliances for managers and practitioners seeking to create value for domestic bio-pharmaceutical companies, and suggests the need to prevent information leakages by establishing a suitable policy.
Alliance;Bio-pharmaceutical industry;Event study methodology;Information leakage;Value
Supported by : 한국연구재단
- R Nidumolu, C. K. Prahalad, M. R. Rangaswami, Why Sustainability Is Now the Key Driver of Innovation, Harvard Business Review, pp. 57-64, 2009
- T. J. Hwang, Stock Market Returns and Clinical Trial Results of Investigational Compounds: An Event Study Analysis of Large Biopharmaceutical Companies, PLoS ONE , vol. 8, no. 8, pp. 1-8, 2013. DOI: https://doi.org/10.1371/journal.pone.0071966 https://doi.org/10.1371/journal.pone.0071966
- B. Munos, Lessons from 60 years of pharmaceutical innovation, Nature Reviews Drug Discovery, vol. 8, pp. 959-968, 2009. DOI: https://doi.org/10.1038/nrd2961 https://doi.org/10.1038/nrd2961
- Deloitte, "Measuring the return from pharmaceutical innovation 2014. Turning a corner?", pp. 1-36, 2014.
- J. A. DiMasi, H. G. Grabowski, R. W. Hansen, Innovation in the pharmaceutical industry: New estimates of R&D costs, Journal of Health Economics, vol. 47, pp. 20-33, 2016. DOI: https://doi.org/10.1016/j.jhealeco.2016.01.012 https://doi.org/10.1016/j.jhealeco.2016.01.012
- A. C. Pellicelli, "Clusters and global value chains in the north and the third world", Strategic Alliances, 2003.
- R. J. Mockler, "Multinational strategic alliances: a manager's perspective", Strategic Change, vol. 6, pp. 391-405, 1997. DOI: https://doi.org/10.1002/(SICI)1099-1697(199711)6:7 <391::AID-JSC325>3.0.CO;2-D https://doi.org/10.1002/(SICI)1099-1697(199711)6:7<391::AID-JSC325>3.0.CO;2-D
- M. Y. Yoshino, "Strategic Alliances: An Entrepreneurial Approach to Globalization", Boston, Harvard Business School Press, 1995.
- K. R. Harrigan, "Joint Ventures and Competitive Strategy", Strategic Management Journal, vol. 9, pp. 141-158, 1988. DOI: https://doi.org/10.1002/smj.4250090205 https://doi.org/10.1002/smj.4250090205
- J. A. C. Baum, T. Calabrese, B. S. Silverman, "Don't go it alone: Alliance network composition and startups' performance in Canadian Biotechnology", Strategic Management journal, vol. 21, pp. 267-294, 2000. DOI: https://doi.org/10.1002/(SICI)1097-0266(200003)21 :3<267::AID-SMJ89>3.0.CO;2-8 https://doi.org/10.1002/(SICI)1097-0266(200003)21:3<267::AID-SMJ89>3.0.CO;2-8
- K. Fernald, E. Pennings, E. Claassen, Biotechnology Commercialization Strategies: Risk and Return in Interfirm Cooperation, Journal of Production Innovation Management, vol. 32, no. 6, pp. 971-996, 2015. DOI: https://doi.org/10.1111/jpim.12218 https://doi.org/10.1111/jpim.12218
- K. W. Glaister. P. J. Buckley, "Measures of Performance in UK International Alliances", School of Business, University of Leeds, UK., pp. 89-118, 1998.
- S. Campart, E. Pfister, "Technology cooperation and stock market value: An event study of new partnership announcements in the biotechnology and pharmaceutical industries", Economics of Innovation and New Technology, vol. 16, no. 1, pp. 31-49, 2007. DOI: https://doi.org/10.1080/10438590600661764 https://doi.org/10.1080/10438590600661764
- A. Arino, "Measures of Strategic Alliance Performance: An Analysis of Construct Validity", Journal of International Business Studies, vol. 34, no. 1, pp. 66-79, 2003. DOI: https://doi.org/10.1057/palgrave.jibs.8400005 https://doi.org/10.1057/palgrave.jibs.8400005
- J. Christoffersen, "A Review of Antecedents of International Strategic Alliance Performance: Synthesized Evidence and New Directions for Core Constructs", International Journal of Management Reviews, vol. 15, pp. 66-85, 2013. DOI: https://doi.org/10.1111/j.1468-2370.2012.00335.x https://doi.org/10.1111/j.1468-2370.2012.00335.x
- J. Christoffersen, "Measures of strategic alliance performance, classified and assessed", International Business Review, vol. 23, pp. 479-489, 2014. DOI: https://doi.org/10.1016/j.ibusrev.2013.07.001 https://doi.org/10.1016/j.ibusrev.2013.07.001
- Korea Pharmaceutical Manufacturing Association, http://www.kpma.or.kr (accessed March, 1, 2017)
- SeokKwan Kim, "20 Years Of Korean Biotech Venture: Past, Present and Challenges for Future", Sciences and Technology Policy Institutes, pp. 1-369, 2013.
- Korea Health Industry Development Institute http://www.khidi.or.kr. (accessed March 10, 2017)
- S. H. Chan, J. W. Kensiger, A. J. Keown, J. D. Martin, "Do strategic alliances create value?", Journal of Financial Economics, vol. 46, no. 2, pp. 199-221, 1997. DOI: https://doi.org/10.1016/S0304-405X(97)00029-9 https://doi.org/10.1016/S0304-405X(97)00029-9
- J. Hagedoorn, "Understanding the Rationale of Strategic Technology Partnering: Interorganizational Modes of Cooperation and Sectoral Differences", Strategic Management Journal, vol. 14, no. 5, pp. 371-385, 1993. DOI: https://doi.org/10.1002/smj.4250140505 https://doi.org/10.1002/smj.4250140505
- W. W. McCutchen Jr, P. M. Swamidass, "Motivations for strategic alliances in the pharmaceutical/biotech industry: Some new findings", Journal of High Technology Management Research, vol. 15, no. 2, pp. 197-214, 2004. DOI: https://doi.org/10.1016/j.hitech.2004.03.003 https://doi.org/10.1016/j.hitech.2004.03.003
- N. Rojjakkers, J. Hagedoorn, "Inter-firm R&D partnering in pharmaceutical biotechnology since 1975: Trends, patterns, and networks", Research Policy, vol. 35, no. 3, pp. 431-446, 2005.
- J. Mittra, "Life Science innovation and the restructuring of the pharmaceutical industry: Merger, Acquisition and Strategic alliance behavior of large firms", Technology Analysis & Strategic Management, vol. 19, no. 3, pp. 279-301, 2007. DOI: https://doi.org/10.1080/09537320701281540 https://doi.org/10.1080/09537320701281540
- D. L. Deeds, C. W. L. Hill, "Strategic alliances and the rate of new product development: An empirical study of entrepreneurial biotechnology firms", Journal of Business Venturing, vol. 11, no. 1, pp. 41-55, 1996. DOI: https://doi.org/10.1016/0883-9026(95)00087-9 https://doi.org/10.1016/0883-9026(95)00087-9
- J. J. Huang, G-H. Tzeng, C-S. Ong, "Motivation and resource-allocation for strategic alliances through the De Novo Perspective", Mathematical and Computer Modeling, vol. 41, no. 6-7, pp. 711-721, 2005. DOI: https://doi.org/10.1016/j.mcm.2004.05.007 https://doi.org/10.1016/j.mcm.2004.05.007
- S. Xu, E. Cavusgil, S. Deligonul, "Number of R&D alliances and innovation output - Nonlinear relationship evidence from the pharmaceutical industry", International Journal of Innovation Management, vol. 20, no. 6, 2016. DOI: https://doi.org/10.1142/S1363919616500602 https://doi.org/10.1142/S1363919616500602
- P. M. Danzon, S. Nicholson, N. S. Pereira, "Productivity in pharmaceutical-biotechnology R&D: The role of experience and alliances", Journal of Health Economics, vol. 24, no. 2, pp. 317-339, 2005. DOI: https://doi.org/10.1016/j.jhealeco.2004.09.006 https://doi.org/10.1016/j.jhealeco.2004.09.006
- D. K. Dutta, M. Hora, "From Invention Success to Commercialization Success: Technology Ventures and the Benefits of Upstream and Downstream Supply-Chain Alliances", Journal of Small Business Management, vol. 55, no. 2, pp. 216-235, 2017 https://doi.org/10.1111/jsbm.12334
- N. Venkatraman, V. Ramanujam, "Measurement of Business Performance in Strategy Research: A Comparison of Approach", The Academy of Management Review, vol. 11, no. 4, 1986. DOI: https://doi.org/10.2307/258398 https://doi.org/10.2307/258398
- E. Anderson, "Two firms, one frontier: on assessing joint venture performance", Sloan Management Review, vol. 32, pp. 19-30, 1990.
- S. J. Brown, J. B. Warner, "Using daily stock returns: The case of event studies", Journal of Financial Economics, vol. 14, pp 3-31, 1985. DOI: https://doi.org/10.1016/0304-405X(85)90042-X https://doi.org/10.1016/0304-405X(85)90042-X
- B. N. Anand, T. Khanna, "Do firms learn to create value? The case of alliances", Strategic Management Journal, vol. 21, no. 3, pp. 295-315, 2000. DOI: https://doi.org/10.1002/(SICI)1097-0266(200003)21 :3<295::AID-SMJ91>3.3.CO;2-F https://doi.org/10.1002/(SICI)1097-0266(200003)21:3<295::AID-SMJ91>3.3.CO;2-F
- P. Kale P, J. H. Dyer, H. Singh, "Alliance capability, stock market response, and long-term alliance success: The role of the alliance function", Strategic Management Journal, vol. 23, pp. 747-767, 2002. DOI: https://doi.org/10.1002/smj.248 https://doi.org/10.1002/smj.248
- B. Xu, "Market differential evaluations of strategic alliances in the pharmaceutical/biotech industry", Journal of High Technology Management Research, vol. 17, pp. 43-52, 2006. DOI: https://doi.org/10.1016/j.hitech.2006.05.004 https://doi.org/10.1016/j.hitech.2006.05.004
- P. Mc. Namara, C. Baden-Fuller, "Shareholder returns and the exploration-exploitation dilemma: R&D announcements by biotechnology firms", Research Policy, vol. 36, pp. 548-565, 2007. DOI: https://doi.org/10.1016/j.respol.2007.02.012 https://doi.org/10.1016/j.respol.2007.02.012
- D. Liu, X. Pu, M. E. Schramm, "Stock Market Response to Strategic Technical Alliances between Drug and Biotechnology Firms", Journal of Product Development & Management, vol. 33, no. 5, pp. 549-569, 2016. DOI: https://doi.org/10.1111/jpim.12305 https://doi.org/10.1111/jpim.12305
- M. C. Woo, S. H. Yoon, "Analysis of the impact of information leakage on the stock price in the announcement of capital increase", Korean Finance Association, vol. 2015, no. 5, pp. 105-123, 2015.
- C. B. Overgaard, R. A. van den Broek RA, J. H. Kim, A. S. Detsky, "Biotechnology stock prices before public announcements: evidence of insider trading?", Journal of Investigative Medicine, vol. 48, no. 2, pp. 118-124, 2000.
- J. M. Rothenstein, G. Tomlinson, I. F. Tannock, A. S. Detsky, "Company stock prices before and after public announcements related Oncology drugs", Journal of the National Cancer Institute, vol. 103, no. 20, pp. 1507-1512, 2011. DOI: https://doi.org/10.1093/jnci/djr338 https://doi.org/10.1093/jnci/djr338
- A. J. Keown, J. M. Pinkerton, "Merger Announcement and Insider Trading Activity: An Empirical Investigation", Journal of Finance, vol. 36, no. 4, pp. 855-869, 1981. https://doi.org/10.1111/j.1540-6261.1981.tb04888.x
- G. A. Jarrell, A. B. Poulsen, "Stock Trading before the Announcement of Tender Offers: Insider Trading or Market Anticipation?", Journal of Law, Economics, & Organization, vol. 5, no. 2, pp. 225-248, 1989.
- D. S. Kim, S. S. Um, "Analysis of the impact of change in investment decisions and target price of domestic and foreign analysts on the stock price", Korean Journal of Financial Studies, vol. 35, no. 2, pp. 75-108, 2005.
- J. Hagedoorn, J. Schakenraad, "The effect of strategic technology alliances on company performance", Strategic Management journal, vol. 15, pp. 291-309, 1994. DOI: https://doi.org/10.1002/smj.4250150404 https://doi.org/10.1002/smj.4250150404
- S. Das, P. K. Sen, S. Sengupta, "Impact of Strategic Alliances on Firm Valuation", The Academy of Management Journal, vol. 41, no. 1, pp. 27-41, 1998. DOI: https://doi.org/10.2307/256895 https://doi.org/10.2307/256895
- C. Haussler, "When Does Partnering Create Market Value?", European Management Journal , vol. 24, no. 1, pp. 1-15, 2006. DOI: https://doi.org/10.1016/j.emj.2005.12.003 https://doi.org/10.1016/j.emj.2005.12.003
- D. Urbig, R. Burger, H. Patzelt, L. Schweizer, "Investor Reactions to New Product Development Failures: The Moderating Role of Product Development Stage", Journal of Management, vol. 39 no. 4, pp. 985-1015, 2013.
- N. Roztocki, H. R. Weistroffer, "Information technology investments in emerging economies", Information Technology for Development, vol. 14, no. 1, pp. 1-10, 2008. DOI: https://doi.org/10.1002/itdj.20084 https://doi.org/10.1002/itdj.20084
- S, Y, Ahn, J. H. Hyun, "The Effect of Partner Selection on the Performance of International Strategic Alliances: The Examination of Moderating Process of Previous Experience", Journal the Korea Academia-Industrial cooperation Society", vol. 14, no. 12, pp. 6204-6210, 2013. DOI: https://doi.org/10.5762/KAIS.2013.14.12.6204 https://doi.org/10.5762/KAIS.2013.14.12.6204