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The Exit Structure of Strategic Alliances

D. Gordon Smith

Brigham Young University - J. Reuben Clark Law School

University of Illinois Law Review, 2005

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.

Number of Pages in PDF File: 15

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

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Date posted: April 20, 2005  

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

Contact Information

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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