When did alliance lead to acquisition? Real options view of Pre-acquisition alliances in Bio-Pharmaceutical Industry
Date Issued
2012
Date
2012
Author(s)
Guo, Song-Guang
Abstract
Drug discovery pipeline and knowledge asset can be considered as important factors in pharmaceutical industry. In order to gain access to external knowledge and other asset that could support the discovery process, pharmaceutical firms usually adopt acquisition activity since it allows firms to acquire the assets immediately. However firms also have to face with risks from the uncertainty. By considering alliance activities as real options reasoning it could help firms solve the uncertainly and lead to complete acquisition activities. In order to support the use of alliances as options, this research aims to investigate the conditions of “how engaging in alliance (as options) helps facilitate the acquisition of alliance partner subsequently”.
This research applies case study method (Multiple cases) to explain the circumstance, by selecting 5 pair of bio-pharmaceutical firms which have pre-acquisition alliances experiences as study samples. By investigating this issue through real options reasoning lens, this research finds that the situation between sequences of alliances and acquisition could be separated into four steps, in each step contain different conditions that could facilitate firm s’ decision to acquire there alliances partner. The study propose that alliance as option could (1) provides firm opportunities to enjoy variety of choices (2) allows firm to influence & control target, (3) develops mutual understanding between both side, (4) confirms target firm complementary abilities, (5) helps firm to identify the right time to acquire, (6) provides rights to acquire when external factors change. Therefore real options reasoning concept could be consider as a concept that bridge alliance and acquisition together.
Subjects
Alliance
Acquisition
Pre-acquisition alliance
Real options reasoning
Pharmaceutical industry
Biotechnology industry
Type
thesis
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