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
Date posted: April 20, 2005