Technological Characteristics and R&D Alliance Form: Evidence from the U.S. Biotechnology Industry

This study seeks to advance and test the knowledge-based theory of the firm as it applies to explaining the governance structure of R&D alliances. Unlike transaction-cost economics, the knowledge-based theory attempts to explain organizational form not primarily in terms of incentive misalignment but in terms of the creation, acquisition, and coordination of productive capabilities. To study the role played by firm-specific technological competencies, I consider three technological characteristics of an alliance: technological similarity, technological relatedness, and technological diversity. With a sample of 111 biotech-biotech R&D alliances, I find that technological relatedness and diversity increase the probability that allying firms would select the higher integration mode. Technological similarity, though, bears a non-monotonic relationship with organizational choice. Overall, the results support the knowledge-based argument that the idiosyncrasy in technological traits influences which type of alliance forms would be selected by allying firms.