The Exit Structure of Strategic Alliances

15 Pages Posted: 20 Apr 2005  

D. Gordon Smith

Brigham Young University - J. Reuben Clark Law School

Abstract

Today, many biotechnology firms use strategic alliances to contract with other companies. This article contends that the governance structure of these alliances - specifically, the "contractual board" - provides an integrated restraint on opportunism. While an alliance agreement's exit structure could provide a check on opportunism by allowing the parties to exit at will, such exit provisions also can be used opportunistically. Most alliance agreements, therefore, provide for contractual "lock in" of the alliance partners, with only limited means of exit. Lock in, of course, raises its own concerns, and the contractual board - which typically is composed of representatives from each alliance partner, each wielding equal power - addresses these concerns about opportunism via the potential for deadlock.

Keywords: Strategic alliances, opportunism, lock in, deadlock, exit

Suggested Citation

Smith, D. Gordon, The Exit Structure of Strategic Alliances. University of Illinois Law Review, 2005. Available at SSRN: https://ssrn.com/abstract=698403

D. Gordon Smith (Contact Author)

Brigham Young University - J. Reuben Clark Law School ( email )

422 JRCB
Provo, UT 84602
United States
801.422.3233 (Phone)
801.422.0390 (Fax)

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