Network Positions and the Probability of Being Acquired: An Empirical Analysis in the Biopharmaceutical Industry

Abstract

This paper examines the relationship between the firm's direct ties, its inter-firm network prominence and its likelihood of being acquired. The authors argue that firm's direct ties and prominence enhance the firm's visibility and signal its quality -and thus foster the firm's likelihood of being acquired. However, higher levels of direct ties and prominence, by providing access to resources and the firm's status, respectively, increase the firm's ability to remain independent and thus reduce its likelihood of being acquired. Thus, the authors posit the overall relation as an inverted U-shaped. Furthermore, they show that, for firms that undergo an initial public offering, the aforementioned relation becomes much weaker. The hypotheses are empirically tested in the biopharmaceutical industry and important theoretical and managerial implications are discussed.

Acquisitions in the biopharmaceutical IPO market: Collaboration, competition and co‐opetition

“…Similar to Mazzola et al (2016), we found tremendous acquisition activity within this market sector with 46% of the firms being acquired.…”

“…Similar to Mazzola et al (), we found tremendous acquisition activity within this market sector with 46% of the firms being acquired. Collaborators, competitors, and those engaged in co‐opetition all were involved in acquiring firms.…”

“…These reasons include increasing public awareness of the firm and its products, creating a market value for the firm, increasing financial transparency, minimizing the cost of capital, lessening dependence on other investors, and as an exit vehicle for founders and other early investors (Celikyurt, Sevilir, & Shivdasani, 2010b;Kim & Weisbach, 2008;Pagano, Panetta, & Zingales, 1998). Despite raising capital in an IPO, many biopharmaceutical firms that have gone public eventually end up being acquired by other firms (Mazzola et al, 2016;Williams, 2013) or acquiring other firms (Celikyurt et al, 2010a). Yet we know little about firms that go public and then later are acquired (Brau et al, 2003;Celikyurt et al, 2010b;Certo, Holcomb, & Holmes, 2009).…”

“…Competitors, collaborators, and firms engaging in both competition and collaboration (e.g., co‐opetition or co‐opetitors) are all involved with acquisitions. This is particularly true in the biopharmaceutical market sector where newer firms are subject to being acquired for their resources in exchange for capital (LaMattina, ; Mazzola, Perrone, & Kamuriwo, ), with this market sector being viewed as the most likely to be engaged in near term future acquisition activity in the United States (KPMG, ).…”

Immigrant Networking and Collaboration: Survey Evidence from CIC

“…5 For example, Dyer and Singh (1998), Lin and Lin (2016), Gulati and Higgins (2003), Zaheer and Bell (2005), Vanhaverbeke et al (2009), Schott andJensen (2016), McDonald, Khanna, andWestphal (2017), and Mazzola et al (2016). their businesses in certain locations and industries.…”