Abstract
In this paper, I study whether CPA and innovation positively interact in contributing to firm performance. Viewing CPA as a nonmarket strategy, I suggest that it works for nonmarket environment and not the market where the transactions that bring firm revenue happens. CPA provides a favorable environment for firms market activities, enabling the firms to gain high profit from their market activities, but does not generate the profit directly. Therefore, CPA should interact with market strategies in affecting firm performance. I also examine whether the interaction between CPA and acquisition, which is suggested to have a similar nature with innovation in the essay, positively influences firm performance. The hypotheses are tested using US pharmaceutical industry data. Results provide support for the interactive effects.
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