Divergent Responses to Financialization in UK Big Pharma?: The Cases of Glaxosmithkline(GSK) Versus Astrazeneca

Both popular views (e.g. Collins, 2015) and sections of the academic literature (e.g. Lazonick and O’Sullivan, 2000; Mazzucato, 2013) suggest that financialization acts primarily as a constraint on non-financial corporations, particularly those pursuing so-called radical innovation as is the case with the pharmaceutical industry (‘big pharma’). Indeed, in this connection, agency theory (Jensen, 1986), the justification for shareholder value approaches, argues that managers need to be disciplined or constrained by capital markets in order to prevent them from investing in unprofitable projects, at the expense of maximizing shareholder wealth. If this is so, then giant firms in the same industry and operating within the identical institutional framework (Hall and Soskice, 2001) should enjoy little leeway as to their strategic choices. In order to evaluate this argument, we focus on how management strategy in two UK big pharma firms interacts with financial markets over a key period for the industry, 2000-2014. Specifically, we address the puzzle as to how two UK big pharma firms with apparently very different strategies manage to co-exist in the same industry which is both highly financialized (Froud et al, 2006; Montalban & Sakinc, 2013; Gleadle et al, 2014) and subject to particular industry pressures, including importantly, the decline in the blockbuster business model. We find that for much of this period, the two firms do pursue apparently very different strategies, which we can summarize as being highly financialized (GSK) versus productionist or non-financialized (AstraZeneca).  Analysis of our two case studies supports Froud et al’s (2014) view that financialization does not necessarily act as a hostile force that imposes itself on countries, firms or individuals with predictable and consistent outcomes. Instead, financialization can be resisted, reversed and is contingent in nature. Indeed, following Soener (2015) financialization may constitute a choice for such firms as GSK and in certain national jurisdictions. We suggest some reasons why such choices may be made.

Key words: financialization, big pharma, business models.