The Impact of Acquisitions in the Biotechnology Sector on R&D Productivity

TL;DR

This paper investigates how acquisitions in the biotech industry affect inventor retention and R&D productivity, revealing significant declines post-acquisition and highlighting factors that influence inventor performance after mergers.

Contribution

It provides empirical evidence on the impact of acquisitions on inventor retention and productivity, using a large dataset and a rigorous difference-in-differences methodology.

Findings

Acquisitions cause a 13.5% decrease in inventor retention.

Post-acquisition, citation-weighted patent productivity drops by 35%.

Older inventors and those with aligned expertise retain higher productivity.

Abstract

This study examines the effects of acquisitions on the retention and R&D productivity of inventors in the biotech sector, using data from 15,318 inventors involved in 1,375 acquisitions between 1990 and 2010. We employ a staggered difference-in-differences approach and find that acquisitions lead to a 13.5% decrease in inventor retention and a 35% drop in citation-weighted patent productivity post-acquisition. The productivity decline is more severe for inventors who remain with the acquiring firm, particularly for those whose expertise is closely tied to the target company. However, older inventors and those whose expertise aligns with the acquiring company's existing R&D portfolio tend to retain higher productivity levels after the acquisition.