An empirical study of the impact of firm resources on alliance governance structures

Alliances between smaller biotechnology firms and larger pharmaceutical firms are the backbone of new product development strategies within the pharmaceutical industry. While pharmaceutical firms seek access to new technologies and products, small biotechnology firms depend on these alliance relationships to access key resources such as financing and downstream capabilities because they typically do not have the resources needed in-house to successfully commercialize their products. In this study, we investigate the governance structure of these alliance relationships arguing that the more resource rich a biotechnology firm is, in terms of technical, commercial, and social capital, the less likely it is to give up equity to an alliance partner. Results suggest that greater biotech patent quality, cash position, and alliance credibility impact the type of governance structure that is chosen by the alliance partners and therefore the extent of control that the biotechnology firm is willing to give up in the relationship.