Negotiating alliance contracts: Strategy and behavioral effects of alternative compensation arrangements
AbstractA key issue in alliances (defined here as any cooperative or joint activity between two or more firms) is the payment or compensation structure stated in the formal agreement between the parties. These days, most agreements include a multiplicity of payment types, including royalties, lumpsum payments and returns on equity. The paper outlines reasons for this and presents a general framework for alliance negotiations. A simulation example shows key negotiation variables, together with non-zero-sum tradeoffs between them. Each map of variable pairs indicates a 'zone of mutual benefit' where the joint profits of both partners can increase. There is often a contradiction between profit maximization and other strategic, behavioral, tax and regulatory considerations which themselves point in non-congruent directions for structuring the alliance. No wonder alliances are such fragile things! Nevertheless, alliances are an indispensable part of the management landscape, and negotiators must know how to structure them. The approach outlined in this paper, the simulation method presented, the caveats indicated for non-financial variables, and the behavioral responses to each, will however help companies to craft better and longer-lasting alliances.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Elsevier in its journal International Business Review.
Volume (Year): 9 (2000)
Issue (Month): 3 (June)
Contact details of provider:
Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/133/description#description
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Macho-Stadler, Ines & Martinez-Giralt, Xavier & David Perez-Castrillo, J., 1996.
"The role of information in licensing contract design,"
Research Policy, Elsevier,
Elsevier, vol. 25(1), pages 43-57, January.
- Macho, I. & Martinez-Giralt, X. & Perez-Castrillo, D., 1993. "The Role of Information in Licensing Contract Design," UFAE and IAE Working Papers, Unitat de Fonaments de l'AnÃ lisi EconÃ²mica (UAB) and Institut d'AnÃ lisi EconÃ²mica (CSIC) 216.93, Unitat de Fonaments de l'AnÃ lisi EconÃ²mica (UAB) and Institut d'AnÃ lisi EconÃ²mica (CSIC).
- Caves, Richard E & Crookell, Harold & Killing, J Peter, 1983. "The Imperfect Market for Technology Licenses," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 45(3), pages 249-67, August.
- Lei, David & Slocum, John W. & Pitts, Robert A., 1997. "Building cooperative advantage: Managing strategic alliances to promote organizational learning," Journal of World Business, Elsevier, Elsevier, vol. 32(3), pages 203-223, October.
- Tarun Khanna & Bharat N. Anand, 1996. "Intellectual Property Rights and Contract Structure," Yale School of Management Working Papers, Yale School of Management ysm37, Yale School of Management.
- Asha Rao & Stuart M Schmidt, 1998. "A Behavioral Perspective on Negotiating International Alliance," Journal of International Business Studies, Palgrave Macmillan, vol. 29(4), pages 665-694, December.
- Balakrishnan, Srinivasan & Koza, Mitchell P., 1993. "Information asymmetry, adverse selection and joint-ventures : Theory and evidence," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 20(1), pages 99-117, January.
- Donald J Lecraw, 1984. "Bargaining Power, Ownership, and Profitability of Transnational Corporations in Developing Countries," Journal of International Business Studies, Palgrave Macmillan, vol. 15(1), pages 27-43, March.
- Mitchell, Will & Singh, Kulwant, 1992. "Incumbents' use of pre-entry alliances before expansion into new technical subfields of an industry," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 18(3), pages 347-372, August.
- Gravelle, Jane G. & Taylor, Jack, 1992. "Tax Neutrality and the Tax Treatment of Purchased Intangibles," National Tax Journal, National Tax Association, vol. 45(1), pages 77-88, March.
- Fainshmidt, Stav & White, George O. & Cangioni, Carole, 2014. "Legal Distance, Cognitive Distance, and Conflict Resolution in International Business Intellectual Property Disputes," Journal of International Management, Elsevier, Elsevier, vol. 20(2), pages 188-200.
- Nishide, Katsumasa & Tian, Yuan, 2011.
"Compensation measures for alliance formation: A real options analysis,"
Elsevier, vol. 28(1), pages 219-228.
- Nishide, Katsumasa & Tian, Yuan, 2011. "Compensation measures for alliance formation: A real options analysis," Economic Modelling, Elsevier, vol. 28(1-2), pages 219-228, January.
- Fabrice Lumineau & Marc FrÃ©chet & Dominique Puthod, 2011. "An organizational learning perspective of the contracting process," Post-Print halshs-01019320, HAL.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If references are entirely missing, you can add them using this form.