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Network Effects in the Governance of Strategic Alliances

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Author Info

  • David T. Robinson
  • Toby E. Stuart

Abstract

We argue that the stock of prior alliances between participants in the biotechnology sector forms a network that serves as a governance mechanism in interfirm transactions. To test how this network substitutes for other governance mechanisms, we examine how equity participation and pledged funding in strategic alliances vary with two features of the way alliance participants are positioned in the network of past deals: proximity, or how close two firms are to one another in the network; and centrality, or how deeply a firm is embedded in the network. As centrality and proximity increase, equity participation (measured by size and propensity) diminishes, whereas pledged funding increases. Copyright 2007, Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/jleo/ewm010
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Bibliographic Info

Article provided by Oxford University Press in its journal The Journal of Law, Economics, and Organization.

Volume (Year): 23 (2007)
Issue (Month): 1 (April)
Pages: 242-273

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Handle: RePEc:oup:jleorg:v:23:y:2007:i:1:p:242-273

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Cited by:
  1. Bengtsson, Ola & Sensoy, Berk A., 2009. "Investor Abilities and Financial Contracting: Evidence from Venture Capital," Working Paper Series 2009-22, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
  2. repec:hal:wpaper:halshs-00624291 is not listed on IDEAS
  3. Beshears, John, 2013. "The performance of corporate alliances: Evidence from oil and gas drilling in the Gulf of Mexico," Journal of Financial Economics, Elsevier, vol. 110(2), pages 324-346.
  4. Ozmel, Umit & Robinson, David T. & Stuart, Toby E., 2013. "Strategic alliances, venture capital, and exit decisions in early stage high-tech firms," Journal of Financial Economics, Elsevier, vol. 107(3), pages 655-670.
  5. Toby Stuart & Soojin Yim, 2008. "Board Interlocks and the Propensity to be Targeted in Private Equity Transactions," NBER Working Papers 14189, National Bureau of Economic Research, Inc.
  6. Stuart, Toby E. & Yim, Soojin, 2010. "Board interlocks and the propensity to be targeted in private equity transactions," Journal of Financial Economics, Elsevier, vol. 97(1), pages 174-189, July.
  7. Felin, Teppo & Zenger, Todd R., 2014. "Closed or open innovation? Problem solving and the governance choice," Research Policy, Elsevier, vol. 43(5), pages 914-925.
  8. Baker, George P. & Gibbons, Robert & Murphy, Kevin J., 2008. "Strategic alliances: Bridges between "islands of conscious power"," Journal of the Japanese and International Economies, Elsevier, vol. 22(2), pages 146-163, June.
  9. repec:hal:wpaper:hal-00842582 is not listed on IDEAS
  10. repec:hal:cesptp:halshs-00624291 is not listed on IDEAS
  11. Cai, Ye & Sevilir, Merih, 2012. "Board connections and M&A transactions," Journal of Financial Economics, Elsevier, vol. 103(2), pages 327-349.

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