BIOPHARMACEUTICAL ALLIANCES AND COMPETITION: A REAL OPTIONS GAMES APPROACH

Giovanna Lo Nigro (), Azzurra Morreale (), Serena Robba () and Paolo Roma ()
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Giovanna Lo Nigro: University of Palermo, Viale delle Scienze, Palermo, Italy
Azzurra Morreale: University of Palermo, Viale delle Scienze, Palermo, Italy
Serena Robba: University of Palermo, Viale delle Scienze, Palermo, Italy
Paolo Roma: University of Palermo, Viale delle Scienze, Palermo, Italy

International Journal of Innovation Management (ijim), 2013, vol. 17, issue 06, 1-22

Abstract: The competitive landscape where pharmaceutical and biotechnology companies operate has changed radically due to a scientific/technological progress that has revolutionised the process by which drugs are developed. In fact, pharmaceutical industry more and more relies on advances in biochemistry and molecular biology. As a consequence, the number of partnerships between pharmaceutical and biotech firms has grown significantly. Research contributions addressing the biopharmaceutical alliances design have also focused on the optimal timing to sign a partnership. In this paper, we introduce and analyse the effect of competition in biotechnology industry by modelling the decisions of whether and when ally with a pharmaceutical company through a real options game. We find that the timing decisions depend on the level of the competition, synergies obtained through the alliance and contract terms offered by the pharmaceutical company as well. Also, we show that the first mover might not always pre-empt the follower in partnering with the pharmaceutical company.

Keywords: Biopharmaceutical alliances; competition; real options games (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (6)

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DOI: 10.1142/S1363919613400239

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