Geographic and social contexts on alliance governance in biotech-pharmaceutical firm alliances

Strategic alliances have increased dramatically in recent years, especially in high tech industries such as biotechnology as a way for firms to gain access to needed resources, expertise, and knowledge for developing and commercializing new products and technologies. The governance structure of an alliance has been shown to be an important consideration in alliance success. Drawing from transaction cost and social network theories we empirically investigate the geographic and social contexts of alliance partners and the influence these factors have on alliance governance structure in the context of biotechnology-pharmaceutical alliances. Using a sample of 393 alliances formed during the period 1995 through 2000, results of this study show the location of the pharmaceutical firm headquarters and the credibility of the biotechnology firm influence the type of governance structure chosen while the location-based technological munificence of the biotechnology firm and the credibility of the pharmaceutical firm did not appear to influence the alliance governance structure. We discuss the implications of our findings from this study for theory, future research, and management practice.