Proactive Versus Reactive M&A Activities in the Biotechnology Industry

This paper examines firm characteristics and external firm linkages as determinants of merger and acquisition activities. The results of the empirical analysis based on in-depth interviews with experts in the biotechnology industry and a unique survey dataset on German biotechnology firms suggest that firms with inter-firm collaborations are generally more likely to engage in merger and acquisition activities than firms that lack such connections. No evidence is found that financial distress is a factor that influences the propensity to engage in merger and acquisition. This points to the notion that merger and acquisition in the biotechnology industry is more proactively initiated than reactively forced by immediate threats through financial shortage, since inter-firm collaborations provide extra resources and legitimacy buffering firms to facilitate change