The Effect of Litigation Experience on the Scope of R&D Alliances

Abstract

This paper examines the role of partnering firms’ litigation experience on their proclivity to enter into broad scope R&D alliances. Although prior alliance research proposed factors that will likely influence partnering firms’ preference for engaging in a broad scope alliance, these studies have focused on product market and capability linkages between partnering firms that are likely to intensify competitive concerns, while understudying how partnering firms’ prior experience can generate similar concerns. In this study, we attempt to fill this theoretical gap by unpacking partnering firms’ prior litigation experience as a novel dimension of experience that has been hitherto not considered in alliance research. We suggest that partnering firms’ greater litigation experience will be negatively associated with their choice of a broad scope alliance. Furthermore, we argue that insofar as partnering firms’ litigation experience intensifies competitive concerns and induces them to opt-out a broad scope alliance, such concerns will allay for partners when partners share dyadic experiences such as common technological experience and collaborative experience. Using a sample of R&D alliance agreements in the biopharmaceutical industry we furnish evidence for our theory.