Date of Award
Open Access Dissertation
Moore School of Business
Innovative biotechnology firms (hereafter, biotechs or biotech firms) consider drug development alliances with incumbent pharmaceutical firms (hereafter, pharmas or pharma firms) as a means to access complementary commercialization capabilities, enhance their managerial skillset through close interactions, and maintain financial stability. However, biotechs face challenges in designing and developing alliance contracts that (a) enable them to retain and refine valuable alliance assets and (b) ensure that the alliance makes tangible scientific progress. Designing contracts to achieve these dual purposes is therefore a salient concern for the biotechs.
Given these challenges, the first essay of this dissertation explores the factors driving the allocation of value capture rights and the proportion of upfront payments to the biotech, both of which are widely used in drug development alliances as governance structures to align incentives, distribute alliance surplus, and provide decision-making authority and financial security in the face of uncertainties. The second essay investigates how governance structures affect a commonly observed instability in alliances: alliance withdrawal, where the pharma firm pulls out its commitment before the alliance achieves any tangible scientific progress. Both essays use econometric analysis of a hand-built archival dataset of drug development alliances signed between 1995 and 2020, combining data sources such as SEC filings, the Bureau of Economic Analysis’s healthcare expenditures, Bloomberg Drug Sales, Crunchbase, etc. The methodologies used to examine the research questions involve reduced-form econometric techniques such as structural equation models, instrument variable regressions, and competing risk proportional hazard models.
Results from the first essay suggest that the knowledge-based competencies of the pharma firms, namely, their commercialization experience, and those of the biotech firms, namely, their proprietary knowledge assets and parallel alliances, affect the allocation of value capture rights and proportion of upfront payments. Results from the second essay suggest that biotech’s value capture rights pertaining to ownership control, specified control, amount of upfront payments, and the manner of knowledge integration affect the risk of alliance withdrawal in direct and interactive ways. I explore how these findings contribute to different streams of operations management thought and provide insights for biotech managers looking at strategic alliances to enhance their product development lifecycle.
Thakar, D. C.(2023). Governance of Drug Development Alliances. (Doctoral dissertation). Retrieved from https://scholarcommons.sc.edu/etd/7198
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