The Influence of Mergers and Acquisitions on R&D Managerial Decision Making : A Multiple-Case Study of Pharmaceutical Firms

Most research and development portfolio managers face one common problem: They are expected to select projects for a portfolio that will yield high returns and a viable pipeline for future growth. The onset of a merger or acquisition adds complexity to existing portfolio management challenges. Prior research has shown that most research and development projects fail or terminate after a merger or acquisition, especially within the pharmaceutical industry. This research takes a case study approach to examine how managers make decisions during the portfolio management process. We apply a narrative-based decision theory to explain what influences their decisions. The major findings that emerged are: (1) post-merger decision-making processes and methods are applied with greater rigor by a more risk-averse leadership team, and lack effective integration of culture, technologies, methods and portfolios, (2) managers' perspectives on how they make decisions differ from how they are actually made when faced with uncertainty, and (3) managers inject personal criterion into standardized portfolio evaluations. We contribute to the literature on portfolio management by providing insight into merger influences on managerial decision making. The implications of R&D post-merger portfolio shrinkage are discussed