| Post-Formation Dynamics in High-Tech Alliances |
| | Zollo, Maurizio | INSEAD | zollo@insead.fr | (33-1) 60724474 |
| | Reuer, Jeffrey J. | INSEAD | jeffrey.reuer@insead.fr | 33 1 60 72 44 73 |
| | Singh, Harbir | U. of Pennsylvania | singhh@wharton.upenn.edu | (215) 898-6752 |
| | This paper investigates the occurrence and determinants of post-formation governance changes in strategic alliances, including alterations in alliances' contracts, boards or oversight committees, and monitoring mechanisms. We examine alliances in the biotechnology industry and find that firms' unique alliance experience trajectories affect the likelihood and extent of such ex post adjustments in these partnerships. Transactional features such as the alliance's scope, its division of labor, and the relevance of the collaboration to the parent firm also bear upon the alliance's dynamics. We discuss the implications of these findings and how they complement prior research focusing on alliance design or termination at opposite ends of the alliance life cycle. |
| | Keywords: strategic alliances; organizational learning; governance changes |
| R&D Alliances: The Role of Governance in Realizing Innovative Potential |
| | Sampson, Rachelle | U. of Michigan | rsampson@umich.edu | 734-747-6068 |
| | I examine collaborative R&D and the contribution of this collaboration to firm innovative output. In this paper, I argue that both firm capabilities and appropriate governance are important determinants of alliance contributions to firm innovative performance. Firm capabilities and the diversity of these capabilities set the alliance innovative potential. Selection of governance, specifically, whether the level of safeguards is sufficient to control the risks of opportunism in an alliance, then determines the extent to which this potential is achieved. Governance, appropriately selected, increases the contribution of capabilities to innovative performance.
I apply the resource based view and transaction cost economics to demonstrate a systematic relationship among firm capabilities, alliance governance and alliance outcomes. I test my hypotheses using a longitudinal dataset of 1174 domestic and international R&D alliances, involving 541 firms in the telecommunications equipment industry, collected from industry journals and news reports. Comprehensive patent data for the years 1975-1997 is used to construct a patent portfolio for each firm in the sample. Preliminary results generally support my hypotheses.
Three contributions to the organizational economics literature emerge from this study. First, I develop a framework for understanding how both firm capabilities and alliance governance affect performance in R&D alliances. Second, I specify and test a link between governance and performance. Finally, I suggest and define a complementarity between resource and "opportunism" based theories of firm behavior based on a systematic linkage between firm capabilities, alliance governance and alliance performance.
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| | Keywords: R&D; Alliances; Internal Governance |
| Valuing Biopharmaceutical Alliances |
| | Rodriguez, Daniel | Emory U. | Daniel_Rodriguez@bus.emory.edu | (404)727-8637 |
| | Strategic alliances among firms in the biopharmaceutical industry (pharmaceutical and biotechnology firms) have increased significantly
over the past decade, and particularly over the last three years. This paper applies an event study analysis to 123 alliances in this
industry over the last three years, to determine the magnitude of the value creation resulting from these alliances. This paper also
completes a cross-sectional analysis using partner characteristics and alliance characteristics to determine some of the potential
sources for this value creation. We find that the R&D partner firms in these alliances experience significant positive cumulative
abnormal returns of 4.4%. We also find that equity participation is associated with more valuable alliances and that alliances involving
complex diseases result in lower value creation. R&D partner firms that had yielded low returns prior to an alliance experience a
significant positive effect as a result of the alliance announcement. The result of lower value creation for complex disease alliances
is consistent with higher transactions costs involved in completing such alliances. Unlike a previous study that considers alliances
across twenty different industries, our analysis finds that research and marketing alliances within the biopharmaceutical industry are
equally valuable. This study contributes to the theoretical debate about alliances by showing that transaction characteristics are
significantly more important for value creation than firm characteristics. |
| | Keywords: Alliances; Biotechnology; Equity Participation |
| Protecting Knowledge and Capabilities in Strategic Alliances: Resource and Relational Characteristics |
| | Norman, Patricia M. | Baylor U. | Patricia_Norman@Baylor.edu | (254) 710-6196 |
| | The resource-based view suggests that firms derive competitive advantage from knowledge, resources, and capabilities that other firms do
not have or cannot replicate. Because strategic alliance partners often can observe a firm more closely than is otherwise possible, alliances
involve the risk of potential knowledge appropriation by a partner. This study examines isolation, a firm's protection of critical or competitively
sensitive knowledge and capabilities from unwanted access and appropriation by an alliance partner.
Using survey data from firms involved in high-technology alliances, I test how resource-based and relational characteristics are related to
the extent to which a focal firm isolates information from an alliance partner. My findings show that a number of resource characteristics are
significantly associated with isolation. First, focal firms isolated information to a greater extent with partners they perceived as having higher
learning intents. Second, focal firms also used greater isolation when a partner had resources and capabilities that were more similar to the
firm. This similarity is indicative of a partner's ability to absorb the firm's knowledge and put it to commercial use (Cohen & Levinthal, 1990).
Third, firms were more protective of highly tacit resources and capabilities, which are often the basis of competitive advantage. Isolation is
further explained by a relational characteristic, trust in an alliance partner. With higher trust, focal firms significantly reduced their efforts to
isolate information. |
| | Keywords: knowledge; resource-based view; strategic alliances |