From Financialisation to Innovation in UK Big Pharma: AstraZeneca and GlaxoSmithKline

The tension between innovation and financialization in global pharmaceuticals is explored, focusing on AstraZeneca and GlaxoSmithKline. In the 2000s, both companies adopted US-style governance but later transitioned to innovation, ceasing stock buybacks to focus on investing in an innovative drugs pipeline. UK corporate-governance institutions played a role in mitigating US-style shareholder-value maximization.

Format: Paperback / softback
Length: 75 pages
Publication date: 22 December 2022
Publisher: Cambridge University Press

The interplay between innovation and financialization is a pivotal aspect of the modern business corporation. Innovation entails a strategic allocation of resources, emphasizing the retention and reinvestment of earnings, which can serve as a catalyst for sustainable and equitable economic growth. On the other hand, financialization entails a shift towards downsizing and distributing financial assets, driven by the ideology of maximizing shareholder value. This Element delves into this tension within the global pharmaceuticals sector, focusing specifically on two leading UK companies, AstraZeneca and GlaxoSmithKline. In the early 2000s, both firms adopted governance structures reminiscent of their US counterparts, including stock buybacks and stock-based executive compensation. However, over the past decade, a significant transformation has taken place. Firstly, AstraZeneca shifted its focus towards innovation, discontinuing buybacks to allocate resources towards investing in a robust pipeline of innovative drugs. This shift was facilitated by the UK corporate governance institutions, which effectively mitigated the excessive pursuit of shareholder value maximization prevalent in the US. Similarly, GlaxoSmithKline also embarked on a journey of innovation, recognizing the importance of creating value through collective and cumulative efforts. By eliminating value destruction caused by financialization and supporting value creation through innovative practices, these companies are paving the way for a more sustainable and equitable economic future. Reinventing capitalism in this manner is crucial for achieving long-term stability and prosperity. This title is also available as Open Access on Cambridge Core, providing access to scholars and researchers worldwide.

ISBN-13: 9781009278164