Contractual Heterogeneity in Strategic Alliances
IESE Working Paper No. D/482
27 Pages Posted: 20 Dec 2003
Date Written: November 2002
We investigate firms' alliance design choices by examining alliances as multifaceted contractual forms. The analysis explores the contractual heterogeneity underlying alternative governance structures for alliances, the bundling of different contractual provisions, and the dimensionality of the contractual completeness construct. The empirical evidence indicates that the complexity of collaborative agreements - in terms of the number and stringency of provisions - is greatest for alliances that are strategically important and involve high levels of asset specificity. Factor analysis of tetrachoric correlations among eight contractual provisions reveals two distinct dimensions of contractual completeness. Partners with prior collaborative relationships tend to institute fewer contractual provisions for monitoring and control of an alliance. Compared with open-ended contractual arrangements, time-bound alliances tend to rely less heavily on such provisions, but more on safeguards concerning confidential and proprietary information, alliance termination, and the adjudication of disputes by third parties.
Keywords: alliances design, governance structures, collaborative agreements, alliance termination
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