Stock Payment, State Ownership and Innovation Performance in China’s Pharmaceutical M&As

Abstract The Chinese pharmaceutical industry has seen rapid development, with industrial mergers and acquisitions (M&As) increasing over the recent years. However, the studies focused on the characteristics and identified limited impacts of these M&As. This paper then intends to fill the gap by analyzing 393 completed M&As deals in China’s pharmaceutical industry from 2004 to 2016 concerning 54 firms. This paper found that: (1) firms’ innovation performance is higher when the industrial M&As activities are intensive. (2) M&As activity improves firms’ innovation output while overly frequent M&As exert negative effects on innovation output. Stock payment is negatively associated with firms’ innovation output. (3) Firms’ innovation performance is statistically different between state-owned enterprises (SOEs) and non-SOEs. Firms’ innovation performance does not vary whether the acquisition was conducted by SOEs or non-SOEs. Apart from providing empirical evidence, this paper, in turn, proposes policy implications for further innovation development in the Chinese pharmaceutical industry.