Demystifying the Black Box: Organizational Design and Contracting for Technology Partnerships

This study moves beyond the traditional atomistic view of firms engaged in alliance agreements. By integrating current research on internal organizational design with research on interfirm collaboration, we investigate the implications of the organizational design of parent firms for the design and governance of technology partnerships. More specifically, we propose that in a research and development (R&D) alliance between a client firm and an R&D firm, the client firm’s internal organizational structure in R&D plays an important role in alliance design and governance. Centralized firms are better able to integrate knowledge in the organization compared with decentralized firms, and hence, we theorize that they will design their technology partnerships for greater knowledge access. Empirical findings from alliances in the biopharmaceutical industry offer support for our predictions: firms with centralized R&D decision making are more likely to capture intellectual property rights. Further, these firms tend to engage in alliances with broader vertical and horizontal scope and greater technological interdependence in order to access, recombine, and distribute knowledge. This study extends research on alliance design and governance by underscoring the important influence of a partner firm’s organizational structure.