Several major econometric studies that looked at mergers and acquisitions (M&As) across various industries concluded that, in general, there is no synergy created or released by M&A. activity. This paper utilizes research and development (R&D) performance in the pharmaceutical industry as a measure of output to examine the impact of MSA activity on corporate productivity. After several decades of relative stability in the pharmaceutical industry, there occurred three distinct "waves" of pharmaceutical company mergers. The first took place in the late 1980s/early 1990s, the second happened in the mid-1990s, and the third occurred at the beginning of the 21st century. This paper examines the effect of the first two waves of corporate mergers in the pharmaceutical industry on research performance. Rather than focusing on conventional econometric/financial indicators, this study considers chemically novel drugs approved by the United States Food and Drug Administration (FDA), as well as patents acquired in the United States, as upstream indicators. Chemically novel drug data, employed in the study as R&D output indicators, were weighted according to the FDA's evaluation of each approved drug's clinical significance as a means of identifying genuine innovation. R&D expenditures of each pharmaceutical organization included in the study were utilized as the R&D input indicator. Preliminary findings indicate that when compared to those companies within the pharmaceutical industry that did not experience merger activity during the same time period, as well as to the industry as a whole, pharmaceutical companies that merged were able to achieve more favorable post-merger productivity scores (i.e., viable new drugs per research dollar expended) than were attained prior to their merger. From a research output perspective, both the first and second waves of mergers within the pharmaceutical industry appear to have been relatively successful. Patent data show the accomplishment of synergy, as well as the implementation of effective merger strategy, for the second wave of mergers. These phenomena contradict the conclusions of the majority of the econometric literature relating to mergers. They are examined in some detail and possible explanations are discussed.
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