The Effect of General and Partner-Specific Alliance Experience on Joint R&D Project Performance

Abstract

Drawing on the organizational learning literature, we posited that both general, diverse-partner experience and partner-specific experience contribute to alliance performance, but at a declining rate. We tested hypotheses in unique data on the objective performance of projects between large pharmaceutical firms and biotechnology partners. The general alliance experience of the biotechnology partners, but not of the pharmaceutical firms, positively affected joint project performance. This relationship exhibited diminishing marginal returns. Contrary to predictions, partner-specific experience had a negative, marginally significant effect on joint project performance.

Old technology meets new technology: complementarities, similarities, and alliance formation

“…While the downstream complementary assets necessary to commercialize new drugs are specialized resources, and thus partly explain the bargaining power of incumbent pharmaceutical firms vis-à-vis new biotechnology firms (Teece, 1986), these downstream assets also contain a generic component in the sense that the regulatory process and drug distribution are more or less identical regardless of whether the drug is based on biotechnology (large molecules) or organic chemistry (small molecules). This in turn makes this competence fungible across different drug commercialization projects (Hoang and Rothaermel, 2005). Consistent with past research (Chatterjee and Wernerfelt, 1991;De Carolis, 2003), we argue that a pharmaceutical company's SM&A expenses, holding everything else constant including firm size, are a reasonable proxy for its strength in the downstream complementary assets needed to commercialize new drugs.…”

“…We proxied direct ties, indicating the level of partner-specific prior alliance experience in each dyad (Zollo, Reuer, and Singh, 2002;Hoang and Rothaermel, 2005), by the total number of prior alliances for each pair (Gulati, 1995a(Gulati, , 1995bAhuja, 2000). For dyads without prior direct ties, we assessed their level of indirect ties through a count number of common partners shared (Powell et al, 1996).…”

R&D partnership portfolios and the inflow of technological knowledge

“…In uncertain environments, firms tend to engage in partnerships with firms they have collaborated with before (Gulati 1995). Such repeat collaboration promotes the development of cooperative routines, especially in the area of R&D in which tacit knowledge sharing requires rich interactions among the personnel of the sponsoring firms (Hoang & Rothaermel, 2005;Zollo, Reuer, & Singh, 2002). Thus, the inflow of technological knowledge from R&D partners increases with repeat collaboration.…”

“…For example, Gulati (1995) shows that the relation between prior partnerships and future partnership formation at the dyad level is an inverted U-shaped one and Hoang and Rothaermel (2005) suggested an inverted U-shaped relationship between repeat partnerships and alliance success.…”

Researching Entrepreneurial Failures

“…Indeed, Ucbasaran et al (2013, p. 175) defined business failure as "the cessation of involvement in a venture because it has not met a minimum threshold for economic viability as stipulated by the (founding) entrepreneur." Shepherd and colleagues defined project failure as the termination of an initiative to create organizational value that has fallen short of its goals (Shepherd, Covin, et al, 2009;Shepherd, Patzelt, & Wolfe, 2011; see also Hoang & Rothaermel, 2005;McGrath, 1999). While there are numerous definitions of failure, we believe researchers should utilize the definition that best fits their study's research question.…”