Strategic Alliances: Trading Ownership for Capabilities
The authors are grateful for invaluable discussions with Tunji Adegbesan, John Hagedoorn, Dietmar Harhoff, Frank Rothaermel, Jerry Thursby, Georg von Graevenitz, Jackson Nickerson, and Marco Ceccagnoli along with seminar participants at the University of Munich and conference participants at the Academy of Management. We also thank the Editor, Daniel Spulber, and two anonymous referees for helpful comments. Haeussler acknowledges financial support from the German Research Foundation [SFB TR 15] and the Munich Center of Health Sciences. Higgins acknowledges financial support from The Imlay Professorship, the Greater Atlanta Regional Grants for the Study of Entrepreneurship and the Georgia Tech Center for International Business Education and Research (GT-CIBER) under a National center grant from the U.S. Department of Education. An earlier draft of this paper was circulated as NBER Working Paper #18364 under the title “Explaining Preferences for Control Rights in Strategic Alliances: A Property Rights and Capabilities Perspective Approach.” Authors are listed alphabetically and the usual disclaimer applies.
Increases in alliance activity between research-intensive firms and incumbents is puzzling because it is challenging to contract upon highly uncertain R&D activities. Our paper extends prior research by exploring the relationship between firm capabilities and gains from trading ownership rights. This link is important because the allocation of ownership rights has been shown to influence alliance outcomes. Using data based on a survey of biotechnology firms, we find that both current and future capabilities provide strong explanatory power for understanding firm valuation of ownership rights. These ownership rights are ultimately allocated across firms in order to maximize their gains from trade.