Contract Theory: Implications for Biopharmaceutical Alliance Structure and Performance

32 Pages Posted: 26 May 2013 Last revised: 29 Dec 2016

See all articles by Niyazi Taneri

Niyazi Taneri

NUS Business School, National University of Singapore

Arnoud De Meyer

Singapore Management University

Date Written: 2016

Abstract

Alliances for new product development have been studied extensively in the operations management literature. Alliances between an innovator and a partner create value by utilizing their complementary capabilities. In this paper, we seek to understand what drives the alliance structure: The choice between collaborative alliances where the parties exert joint efforts and sequential alliances where, for the most part, the partner takes over going forward. Our analysis of a dataset of over 2000 biopharmaceutical alliances reveals our main finding: A key role of operational choices is to address contract theoretic concerns faced by an alliance. We also find that aligning the choice with predictions based on contract theory has consequences for performance. Therefore, our analysis not only has descriptive power about the drivers of alliance choice but also provides valuable insight into the performance and eventual fate of alliances formed.

Keywords: New Product Development, Alliances, Performance, Technology Management, Operations Management, Strategy, Signaling, Hold-up, Risk Aversion, Asymmetric Information

JEL Classification: O31, O32, O33, L24, L25

Suggested Citation

Taneri, Niyazi and De Meyer, Arnoud, Contract Theory: Implications for Biopharmaceutical Alliance Structure and Performance (2016). Available at SSRN: https://ssrn.com/abstract=2269381 or http://dx.doi.org/10.2139/ssrn.2269381

Niyazi Taneri (Contact Author)

NUS Business School, National University of Singapore ( email )

15 Kent Ridge Drive
Singapore, 119245
Singapore

Arnoud De Meyer

Singapore Management University ( email )

Li Ka Shing Library
70 Stamford Road
Singapore 178901, 178899
Singapore

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