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Egypt’s Position in Technology and Information Led GlobalizationMerger of firmsenables them tobenefit fromeconomies of scalesand from externaleconomies not onlyface firms workingfrom an economicperspective, but alsocountries workingfrom a strategic one.important five industrial sectors in terms ofMerger and acquisition operations acrossborders. Two of the most importantobjectives of these operations are increasingmarket power, and supporting innovationstrategies.The cost-benefit analysis of these Mergerand acquisition operations is debatable.Many writers believe that their negativeimplications for developing countriesoutweigh their benefits especially withrespect to:1. Maximizing market power. Theoligopolistic trait of thepharmaceutical market increases theability of firms to influence the pricingsystem. Consumer choice and welfaretherefore become endangered, and thedistorted prices are inefficient inallocating resources or distributingincomes. If the good (medication) andthe service (medical treatment) areinelastic with respect to price andincome, the negative impact of anoligopolistic market on consumers,society, and the whole economy willbe more severe.2. Impact on invention. Merger of firmsenables them to benefit from economiesof scales and from external economies.In addition, it allows firms to allocatemore financial resources to R&D, and toestablish a larger base of human skills inthe scientific-technological area. However,integration and acquisition operationsmight have negative implications onSMEs specialized in innovation, knownas start- ups, especially in the pharmaceuticalsector. The increasing power oflarge firms allows them to exploit theyield of small firms’ efforts, integrate itinto their invention circuit, and therebyget the larger share in the rent comingfrom technological scarcity.In general, major pharmaceutical firms (lessthan twenty) seize more than 50 per cent oftotal world medicine sales. Glaxo (Mergerwith Wellcome), Novartis (emerging fromthe Merger of Sandoz and Cibageigi),Merck (Merger with Lipha) and Hockst(integrated with MMD) come at the top ofthe list.It is worth mentioning that the Egyptianpharmaceutical industry is not removedfrom this global integration-acquisitionfever. Britain’s Glaxo Wellcome acquired90 per cent of Amun shares (private sector),thereby increasing its share in the Egyptianmedicine market from 6 per cent to 10 percent and becoming the seventh largestpharmaceutical firm in Egypt.Strategic AlliancesStrategic alliances are concluded at the levelof R&D or promotion and marketing, in orderto form blocks able to reduce expenditures,increase revenues, and maximizeprofitability rates. Strategic alliance agreementsin the technological area can be undertakenwith independent, university, orgovernment research centers, or betweenlarge firms. The agreements often focus oncertain areas (genetic treatment, antibodies,neurological treatment etc). The Egyptianpharmaceutical industry has not yet enteredinto this type of exercise.Finally, the enlargement of pharmaceuticalindustry actors, who are concentrated in asmall number of firms belonging to a limitednumber of nationalities (USA and someEuropean countries), is coupled with influenceover the organs of state through interventionin public policy to organize and mobilizethe pharmaceutical industry. This isaccomplished through a number of tools,among which are government and militaryR&D contracts, medicine registration, supervision,and pricing.It could therefore be argued that developingcountries not only face firms working froman economic perspective, but also countriesworking from a strategic one. Mostly thesetwo perspectives overlap, for example whenthe ex-president of Pfizer undertook theresponsibility for the preparation ofAmerican trade policy with respect to intellectualproperty, and eventually succeeded informulating an international agreement inthis area in the context of the UruguayRound.90 -Egypt Human Development Report 2000/2001