Governance Inseparability and the Evolution of the Biotechnology Industry
Posted: 3 Jan 2002
This paper explores mechanisms through which a party's choice of governance mode for a focal transaction is constrained by the governance choices it made for other, prior transactions. We argue that this condition of "governance inseparability" plays an important role in determining the differential organizational costs incurred by various firms when undertaking the same new activity, and is therefore important for theories aimed at predicting what kinds of firms will undertake such an activity. We develop these arguments by showing how governance inseparability conditions help explain the persistent fragmentation of the U.S. biotechnology industry.
Keywords: Governance, transaction costs, industry evolution
JEL Classification: L1, L2, O3
Suggested Citation: Suggested Citation