Innovation, Business Strategies and Stock Returns in Biotechnology Industry

Abstract

The paper analyzes the impact of small biotechnology firms' innovation and business strategies on their stock returns utilizing event study methodology. These are some of the conclusions supported by the empirical results: (i) firms should focus on regulatory approval of their products; (ii) it is important to recruit individuals and consulting firms with valuable specialized expertise in field; (iii) firms should pursue licensing and manufacturing deals aggressively; and (iv) firms should be highly selective and careful with deals they make for R&D collaboration with scientific community. The implications could be valuable to managers of startup firms in this particular industry and possibly in others, as well as for understanding how financial markets react to innovation announcements.