Abstract
This paper empirically investigates factors affecting the relative bargaining strength of sellers and buyers in biotechnology markets, using transaction-level data for alliances between 1993 and 2008. Specifically, a two-tier stochastic frontier model is applied to our dataset for estimating the advantage of sellers and buyers, separately, and the advantage difference between them is regressed on possible determinants, such as scope of technology, stage of pharmaceutical R&D process, previous experience forming technology alliances, seller and buyer characteristics, and financial market conditions at the time of agreement. The results show that buyers were greatly advantaged over sellers in many alliances. However, a seller's bargaining position tended to improve significantly after the clinical research phase, as did repeating transactions with previous partners. US sellers also enjoyed an advantage over non-US buyers.
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