Content area
Full Text
Introduction
How do acquisitions affect the retention of inventors, the employees who are essential to driving innovation and R&D productivity? This question is particularly important in R&D-intensive industries where acqui-hires are widespread, as the success of an acquisition depends on the management of intellectual property and the crucial tacit knowledge of inventors.
A company’s performance after an acquisition depends on its ability to reorganize its activities to leverage the assets and capabilities of the acquired company (Arroyabe and Hussinger 2018). Crucially for Research and Development (R&D)-intensive industries, the success of the acquisition depends on both tangible and intangible assets. Therefore, intellectual property, both codified (e.g. patents) and tacit (i.e. crucial employee know-how), must be managed carefully not to jeopardize the takeover. Gottweis and Prainsack (2006) find that employee turnover is a major reason for the failure of Mergers and Acquisitions M&A, with up to three-quarters of these deals reported to fail (King et al. 2004). This is particularly relevant in knowledge-intensive industries following a paradigm shift, such as the life sciences, which experienced a rush of M&As in the Nineties (Riccaboni and Pammolli 2002) to absorb knowledge in the emerging field of biotechnology. M&A deals in 1999 involving US companies were worth well over 500 USD billion (Danzon et al. 2007), underlining the economic importance of this practice. At that time, the target companies were primarily new biotechnology firms (NBFs) that had been established since the mid-seventies and were preparing to challenge the leadership of the established pharmaceutical companies (Béraud et al. 2020; Orsenigo et al. 2001; Pammolli et al. 2021; Riccaboni and Pammolli 2002). The biopharmaceutical sector is an exceptionally R&D-intensive sector, with Pharmaceutical Researchers and Manufacturers of America (2012) claiming that up to 17% of revenue is spent on R&D, compared to the US industry average of 4% (Danzon et al. 2007). The importance of patents in particular and intellectual property in general is well known in the biopharmaceutical industry (Cohen et al. 2000). Therefore, the knowledge that lies within the teams of patent inventors is crucial for the development of innovative drugs.
Inventors, the employees behind these innovations, play a crucial role in knowledge production; therefore, their retention after M&As is vital. Retention of inventors is crucial considering they possess tacit and...