Marshallian Forces and Governance Externalities: Location Effects on Contractual Safeguards in Research and Development Alliances
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AbstractWe examine the impact of geographic location of alliance activities on the design of safeguards in contracts governing research and development (R&D) partnerships. Joining research on agglomeration and alliance governance, we argue that the Marshallian agglomerative forces at work in a given location produce governance-related externalities that extend beyond productivity-related externalities considered in previous research. We investigate how location characteristics linked to Marshallian forces, such as local knowledge spillovers, R&D rivalry, dense industry employment, and the strength of professional organizations, have an impact on the specification of formal governance mechanisms. In particular, these Marshallian forces have a bearing on formal governance mechanisms that safeguard the execution of the R&D partnership, such as joint administrative interfaces and termination provisions. We analyze R&D partnerships between biotechnology and pharmaceutical firms and find that misappropriation hazards arising from greater knowledge spillovers and R&D competition in the region where R&D activities are located promote the use of these formal governance mechanisms in R&D partnerships. We also find that factors supporting thick interpersonal networks, such as the intensity of sectoral employment and the strength of professional bodies, reduce the use of formal governance mechanisms in R&D partnerships.
Acceptance Date29/10/2017
All Author(s) ListDevarakonda SV, McCann BT, Reuer JJ
Journal nameOrganization Science
Volume Number29
Issue Number6
Pages1112 - 1129
LanguagesEnglish-United Kingdom
Keywordsstrategic alliances and networks, interorganizational relationships, transaction cost economics, agglomeration
Web of Science Subject CategoriesManagement;Business & Economics

Last updated on 2021-14-01 at 01:11