The influence of joint venture collaboration on the performance of multinational pharmaceutical companies in South Africa

Abstract

This study investigated the influence of joint venture collaboration on the performance of multinational pharmaceutical companies (MNPCs) conducting business in South Africa. The study sample consist of five international MNPCs engaged in joint venture collaboration agreement, and four local South African non-joint venture collaboration pharmaceutical companies for the purpose of comparison. The study collected dataset from the consolidated annual financial statements over the period between 2010 and 2019. Firm performance was measured using return on assets, return on equity (ROE) and return on investment (ROI) as dependent variables. Market share, research, and development (R&D) expenditure and capital expenditure (capex) were independent variables, representing market-seeking, knowledge-seeking and efficiency-seeking motives of the company respectively. The study employed Pedroni residual cointegration test to gauge whether the variables have a long-run relationship. The pooled mean group (PMG) estimator was adopted under the auto-regression distributed lag (ARDL) for both sample-wide and firm-specific estimations. The findings of the study in the sample-wide estimations were that joint venture collaboration had a significant positive influence on the performance of MNPCs in the long run. However, in the short run, only market share mattered for the performance of the joint venture in the study. When compared with non-joint venture firms in the study, the driver of positive performance in the long run and short run was market share, while capex had a negative effect in both long run and short run. There were also firm-specific differences. The practical implication of the findings of this study is that, in the long run, joint ventures enhance firm performance; however, market-seeking is the strongest driver of firm performance in the short run. Pharmaceutical firms should therefore pursue joint venture collaboration for long-term survival and intensify efforts to grow market share or seek new markets for short-term growth and survival. Firm-specific differences indicated the need for firm-specific strategies as suitable.