Do Alliances Lead to Competition? An Empirical Analysis of the US Biopharmaceutical Industry

Abstract

This study extends the learning race perspective to examine whether familiarity between firms developed through R&D alliances will motivate them to engage in technological competitions. Specifically, we argue that the payoffs of an alliance, in terms of common and private benefits that accrue to individual firms, are updated over the course of alliances between two firms. Firms are likely to reduce competition in their initial alliance contacts for the prospect of larger common benefits over private benefits. However, the likelihood of competition is heightened at later stages of their repeated interactions due to increased payoffs in private benefits. We further contend that this U-shaped relationship between the number of R&D alliances and technological competition is moderated by partner firm’s reputation of trustworthiness and technological similarity with the focal firm. Analyses of US biopharmaceutical firms during 1985 and 2004 support our hypotheses. Our study contributes to an enriched understand...