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Marshallian forces and governance externalities : location effects on contractual safeguards in R&D alliances
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Devarakonda, Shivaram V., McCann, Brian T. and Reuer, J. J. (2018) Marshallian forces and governance externalities : location effects on contractual safeguards in R&D alliances. Organization Science, 29 (6). pp. 1112-1129. doi:10.1287/orsc.2018.1221 ISSN 1047-7039.
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Official URL: https://doi.org/10.1287/orsc.2018.1221
Abstract
We examine the impact of geographic location of alliance activities on the design of safeguards in contracts governing 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 biotech 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.
Item Type: | Journal Article | ||||||||
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Subjects: | H Social Sciences > HD Industries. Land use. Labor | ||||||||
Divisions: | Faculty of Social Sciences > Warwick Business School > Strategy & International Business Faculty of Social Sciences > Warwick Business School |
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Library of Congress Subject Headings (LCSH): | Biotechnology industries, Pharmaceutical industry, Research and development contracts | ||||||||
Journal or Publication Title: | Organization Science | ||||||||
Publisher: | Institute for Operations Research and the Management Sciences (I N F O R M S) | ||||||||
ISSN: | 1047-7039 | ||||||||
Official Date: | November 2018 | ||||||||
Dates: |
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Volume: | 29 | ||||||||
Number: | 6 | ||||||||
Page Range: | pp. 1112-1129 | ||||||||
DOI: | 10.1287/orsc.2018.1221 | ||||||||
Status: | Peer Reviewed | ||||||||
Publication Status: | Published | ||||||||
Access rights to Published version: | Restricted or Subscription Access | ||||||||
Description: | |||||||||
Date of first compliant deposit: | 7 February 2018 | ||||||||
Date of first compliant Open Access: | 28 March 2019 | ||||||||
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