Organization Structure Matters: R&D Centralization and Alliance Governance

Abstract

We bridge current streams of corporate strategy and cooperative strategy research to investigate the potential implications of organizational structure for alliance governance in technology partnerships. We propose that in an alliance between a client firm and an R&D firm, the client firm’s internal structure of R&D plays an important role in the alliance design and governance, specifically in determining the scope, interdependence, and contracting of alliance activities and the distribution of control rights. Using data from alliances in the bio-pharmaceutical industry, we find that firms with centralized R&D structure tend to engage in alliances with broader scope and higher task interdependence, and they are more likely to capture the upstream control rights through the design of R&D contracts. We therefore extend research over several decades that has examined the organization and structuring of alliances themselves to highlight the importance of parent firm organizational structure for the ways that firms set up alliances.