Keeping Financially Afloat: The Influence of Resources and Social Capital on Financial Capital Acquisition by Small Biotechnology Firms from Large Pharmaceutical Firms at Alliance Formation

Abstract

Strategic alliances with pharmaceutical firms allow small biotechnology firms to acquire needed financial capital in exchange for the sharing of new, cutting-edge technologies. While prior research has considered the importance of resources in biotech firm acquisition of financial capital through the formation of alliances, the role of social capital in this acquisition process has not been explored. This study draws from complementary aspects of the resource-based and social capital theories to examine the factors that influence the extent of financial capital biotech firms acquire upon the formation of alliances with pharmaceutical firms. Results of this study suggest that resource based factors play a greater role in biotech financial acquisition than social capital factors. Specifically, alliances associated with more developed technologies and greater pharmaceutical firm control are associated with greater acquisition of financial capital by the biotech firm. In addition, the credibility of the pharmaceutical firm enables greater biotech financial capital acquisition. However, the social capital of the biotech firm does not appear to enable capital acquisition