Alliance Contracts Research Articles

Kindred spirits: Cognitive frame similarity and good faith provisions in strategic alliance contracts

AbstractResearch SummaryAn intriguing yet underexamined phenomenon in strategic alliance contracts is the use of good faith provisions. These provisions appeal to parties' integrity and fair dealing but are often ambiguous, and their enforcement in court is unpredictable. Adopting a sociocognitive perspective, we predict a positive relationship between the similarity of partners' organizational‐level cognitive frames and the number of good faith provisions in alliance contracts. We further posit that technological uncertainty strengthens this relationship, whereas each alliance partner's cumulative contracting experience weakens it. We also expect a more positive relationship in instances of “genuine” good faith, which serves as a substitute for an explicit clause, compared with “guarded” good faith, which supplements an explicit clause. Our analysis of 1225 strategic alliance contracts from the biopharmaceutical industry supports our arguments.Managerial SummaryManagers negotiating strategic alliances often face a dilemma: they negotiate detailed contracts to reduce legal risk but limit flexibility or opt for less codification, saving time and retaining flexibility but increasing legal risk. Good faith provisions offer a potential solution because they are flexible yet legally enforceable, but they require a shared interpretation of the relevant contingency, raising questions about when managers find this approach reasonable. We analyzed 1225 biopharmaceutical alliance contracts and found that such provisions are more common when alliance partners have similar cognitive frames, as evidenced by similar “About Us” web pages. This effect is stronger under conditions of greater technological uncertainty but weakens with more alliance experience. Our study elucidates the use of good faith provisions to aid managers in navigating alliance negotiations efficiently.

Strategic Alliance Governance Through Termination Provisions: Safeguard and Incentive, Flexibility and Commitment

Termination provisions establish vital governance mechanisms in alliances, offering essential safeguards and incentives by providing the flexibility to exit (underperforming) partnerships. However, they can also foster distrust and instability by potentially undermining commitment and continuity. We argue that the motivation behind termination provisions lies in the need to address safeguarding and flexibility concerns arising from increases in alliance scope, upfront payments, and technological uncertainty. Conversely, alliances with strong relational commitment and social embeddedness stemming from prior and indirect ties tend to omit termination provisions. Drawing on an analysis of 1,576 biopharmaceutical alliance contracts, we scrutinize various conditional and unconditional termination rights, along with their partner-specific allocations. Among other findings, we observe a positive association between broad alliance scope and termination rights for patent challenge, for lack of reasonable effort, and for specific countries assigned to the research and development (R&D) firm contributing technological expertise and, furthermore, termination rights for convenience for the client firm sponsoring the alliance. Larger unilateral upfront payments increase the likelihood that the client firm receives termination rights for lack of reasonable effort and for convenience. Higher technological uncertainty is associated with termination rights for convenience for the client or R&D firm. In contrast, prior ties negatively correlate with termination rights for convenience for the client firm, while indirect ties show a negative association with termination rights for convenience and specific countries for the R&D firm. Conceptually, our study highlights the relevance of termination provisions as elastic governance mechanisms that enable partners to accommodate postcontractual disturbances.

A Synergetic Effect of the Integration of Lean, Sustainable Construction Practices and Alliance Contract on Operation Performance in the Indian Construction Industry

By pioneering a comprehensive analysis of lean integration within the construction sector, this research provides novel insights into optimizing project outcomes. The construction industry is generally known for its frequent deadline slip-ups, budget overruns, and issues with upholding proper quality. It is usual practice to integrate different management techniques which are successful in the production industry in order to avoid such issues. Several researchers adopted sustainable construction management, lean management and alliance contract practices individually on construction sites to improve the profit, productivity, quality and transparency of the project. In this study, the synergetic integration of sustainable construction management, lean management and alliance contract practices have been studied. A questionnaire survey was conducted among 345 practitioners, resulting in 309 responses after screening. These respondents, comprising various roles in the AEC sector, provided insights into their experience, project involvement, and business sectors. The study identified 23 factors associated with lean practices, sustainable construction, and alliance contracts, examining their relationships and benefits through Structural Equation Modeling (SEM). The results demonstrate significant effects of lean practice, sustainable construction, and alliance contract factors on the benefits derived from their integration. Measures of reliability and validity affirm the robustness of these relationships. The discussion underscores the benefits of integration, including enhanced efficiency, reduced environmental impact, improved collaboration, shared risk and reward, superior project outcomes, and competitive advantage. Overall, this research elucidates the potential advantages of integrating these methodologies within construction projects.

Synergistic effect of alliance contract and lean methodology on project performance measures in the construction industry: SEM analysis

Alliance contracting is introduced in pre-construction to improve joint ventures and Lean reduces pre-construction and construction waste. Using Alliance and Lean in construction projects improves quality, transparency, and productivity due to which Lean and Alliance strategies are adopted by Researchers and Organizations. Lean and Alliance practices for construction have been studied, but most studies have not analyzed the effect of the integration of Lean and Alliance. This is the motivating factor behind the current investigation which surveys the Indian construction industry. This study uses factor analysis, Structural Equation Modelling (SEM), and the weighted average method to explore the synergistic effect. The study identified the lack of stakeholder commitment and better work transparency as barriers and benefits of Alliance Lean integration. This study's Hypothesis also shows that integrating Alliance with Lean methodology is effective. Therefore, this study proposes combining Alliance and Lean to improve construction project delivery.

Examining the conditions for signing a strategic alliance contract: a configurational approach to the biotechnology sector

Examining the conditions for signing a strategic alliance contract: a configurational approach to the biotechnology sector

IMPORTANCE INDEX THEORY APPLIED TO ALLIANCE PROJECT GEOTECHNICAL RISK STRATEGY

Alliance contracts are consummated before the subsurface investigation to support the final geotechnical design is complete, forcing clients and their industry partners to operate with high levels of geotechnical uncertainty during the negotiation of the alliance agreement. Research has shown that perceptions of each stakeholder of this key area of uncertainty are very different, making it challenging to achieve alignment. The purpose of this paper is to propose an objective methodology for alliance members to prioritize geotechnical risk factors during the agreement negotiation process to determine those factors that should be clarified before determining a target outturn cost. This paper proposes an objective methodology based on importance index theory computed from each geotechnical factor’s frequency and impact. Survey data collected from 46 public transportation agency and industry experts provided the input. The paper proposes that a prioritized list of project-specific geotechnical risks be used to guide the negotiations and potentially identify the need for preliminary subsurface investigations to support the development of the target outturn cost. The framework is applied to a typical alliance project to demonstrate its efficacy. The paper’s primary contribution is the importance index-based methodology for ranking geotechnical risk factors, which may be utilized as a checklist to guide negotiations of geotechnical risk distribution in the alliance agreement.

Allianzverträge – Ohne Rechtsstreit durch die Krise

AbstractClaim‐ and anti‐claim‐management is becoming increasingly important on construction sites. More and more (human) resources from contractor and owner are being invested in projects for this purpose. This is clearly counterproductive for the success of the project, since claim and anti‐claim‐management do not create any added value in the project and the actual target of a construction project is pushed into the background. In this article, the differences between plannable and dynamic‐complex systems are used to show, where classic construction contract models reach their limits and which projects are better implemented with alternative contracts. Based on the Alliance Contract for the successfully completed project „Triebwasserweg Maria Stein”, it is shown why Alliance Contracts are more suitable than classic contract models for dynamic‐complex (risky) large‐scale projects, such as large tunnel projects in difficult geology. By choosing the right contract model for the project, the best project results can be achieved, and legal disputes can be avoided even in crisis situations.

Knowledge dissimilarity, bargaining power, and smaller firms’ ability to negotiate a favorable alliance contract

This paper investigates how partners in asymmetric R&D alliances contractually contend with the problems that arise when their knowledge sets are dissimilar. This paper also examines the sources of bargaining power that smaller firms leverage in negotiations with larger partners to gain concessions on specific terms. Using a sample of 136 alliances formed to develop new medical devices, we find that facilities access and non-solicitation clauses are included in the contract when the partners’ knowledge sets are dissimilar. We also find that smaller firms selectively use their bargaining power to win concessions related to the use of these terms.

Collaboration and opportunism in megaproject alliance contracts: The interplay between governance, trust and culture

Alliance contracts have been introduced in megaprojects to improve the alignment of objectives, risk and reward between client and contractor. However, the relational norms of alliances are not sufficient on their own to eliminate opportunistic behaviors. This study shows that, investing in mechanisms supportive of governance, culture, and trust provides a platform upon which firms may foster collaboration and limit self-interest oriented behavior amongst alliance partners. Our qualitative case study of a major project-based organization reveals the impact of these mechanisms, and more pointedly, how they interact and often reinforce each other. Governance, culture and trust are interlinked and complementary, and managers need to reflect holistically on their interactions in order to establish collaborative, rather than opportunistic behaviors.

The Effects of Contract Detail and Prior Ties on Contract Change: A Learning Perspective

Despite the large literature on alliance contract design, we know little about how transacting parties change and amend their underlying contracts during the execution of strategic alliances. Drawing on existing research in the alliance contracting literature, we develop the empirical question of how contract detail and prior ties influence the amount, direction, and type of change in such agreements during the collaboration. We generated a sample of 115 joint ventures (JVs) by distributing a survey to JV board members or top managers and found that the amount of contract change is negatively associated with the level of detail in the initial contract but is positively associated with the number of prior ties between alliance partners. In relation to the direction of contract change, we find that the level of detail of the initial agreements negatively correlates with the likelihood of removing or weakening existing provisions and that prior collaborative experience positively correlates with the likelihood of strengthening of existing provisions or adding of new ones. We also find that prior ties affect the type of change in that JV parents prefer to change enforcement provisions more so than the coordination provisions in the contract. Our paper generates new insights on the complementarities between relational governance and transaction cost economics perspectives on alliance contracting.

Accounting Quality and Alliance Contract Provisions

ABSTRACTWe show that the number of governance provisions imposed on a firm by a strategic alliance partner decreases with the firm's accounting quality. This effect is weaker when the firm has greater bargaining power and stronger when the alliance project is riskier. Moreover, the net benefit to an alliance partner of imposing an additional governance provision on its counterparty apparently increases when the counterparty accounting quality is low, resulting in an enhancement of the partner's market value and a reduction in its bankruptcy risk. Furthermore, alliance partners adopt fewer provisions based on their counterparties' accounting numbers when the counterparties' accounting quality is poor.JEL Classifications: D74; M41.

Achieving relational governance effectiveness: An examination of B2B management practices in Taiwan

This study examines the antecedents of relational governance effectiveness in a country context where the prevalence of Confucian values is expected to create a culturally ingrained preference for relational governance. We also explore whether different management practices are better predictors of relational governance effectiveness under different collaborative inter-firm relationship configurations. Results from an analysis of 182 alliance relationships in Taiwan, a dynamic newly developed economy, reveal that, generally, demonstrating trustworthiness, establishing just and fair procedures, and building effective platforms for connectivity are management practices that are good predictors of relational governance effectiveness. The multi-group analysis provided more nuanced insights. The findings suggest that different inter-firm relationship configurations require different subsets of management practices. Building effective platforms for connectivity is a strong predictor of relational governance effectiveness in equity-based alliances with foreign partners. In equity-based alliances with domestic partners, establishing fair and just procedures is emphasized. In contractual alliances with foreign partners, ensuring contractual clarity and building effective platforms for connectivity are found to be facilitators of relational governance effectiveness. Last, contractual alliances with domestic partners seem to rely on a portfolio of management practices encompassing demonstrating trustworthiness, establishing just and fair procedures, and building effective platforms for connectivity.

Disciplinary Regime or Freedom Strike? Termination Rights in R&D Alliances

A central challenge for the governance of interorganizational relationships is the implementation of safeguards against opportunistic behavior while ensuring post-contractual adaptation. Previous research has highlighted the possibility of mitigating opportunistic hazards and achieving adaptation through administrative controls such as boards and steering committees. An aspect that has received insufficient attention though is that the authority of administrative control is tied to the underlying contract and can therefore be undermined by contractual termination rights which revoke the contractual obligations. Based on this idea, we argue that termination rights offer an important discriminant for interorganizational governance choices. We further explain when and why partners agree on conditional and unconditional termination rights in alliance contracts. Using a sample of 1,400 strategic alliance contracts from the biopharmaceutical industry, we find support for the argument that termination rights can mitigate opportunistic behavior and adaptability concerns. Thereby, this study contributes to interorganizational governance research by illustrating that termination rights can be an important, but so far under-valued, governance mechanism in interorganizational relationships.

Accounting Quality and Alliance Contract Provisions

We show that the number of governance provisions imposed on a firm by a strategic alliance partner decreases with the firm’s accounting quality. This effect is weaker when the firm has greater bargaining power and stronger when the alliance project is riskier. Moreover, the net benefit to an alliance partner of imposing an additional governance provision on its counterparty apparently increases when the counterparty accounting quality is low, resulting in an enhancement of the partner’s market value and a reduction in its bankruptcy risk. Furthermore, alliance partners adopt fewer provisions based on their counterparties’ accounting numbers when the counterparties’ accounting quality is poor.

Inter-temporal and inter-spatial institutional change influencing the duration decision of the Sino-foreign university alliances

Abstract The inter-temporal and inter-spatial institutional change in China have precipitated the internationalisation trends in Chinese higher education, leading to Sino-foreign inter-university alliances. Does the institutional development reflect on the contractual duration differences before and after these institutional changes? This article addressed to answer the duration decision. The inter-temporal institutional development measures the (i) WTO membership and (ii) educational policy in 2003. The inter-spatial institutional change represents the national cultural differences based on indices. The analysis of 717 alliances between 327 foreign partners and 262 Chinese universities shows support for both types of institutional developments. The results on inter-temporal institutional change show that the post-institutional change contractual duration has decreased compared to pre-institutional change. The result of the inter-spatial institutional differences shows mixed results. Power distance predicts longer duration. Likewise, masculine cultures, compared to the feminine culture, show a longer duration of the alliance contract. Instead, the long-term orientation (marginally significant) shows decreased duration. Individualist and uncertainty avoidance cultures show no significant difference, which may be due to the policy changes that have accounted for the individualist and uncertainty avoidance cultures.

Briefing: Can alliance contracts provide a delivery platform for greater collaboration with building information modelling?

The management of digital information and use of building information modelling call for a collaborative working environment. The two published international information management standards in the BS EN ISO 19650 series emphasise the significance of mutual understanding, trust and participation, although the merits of collaboration are only sparingly contained within them. The new standards can therefore benefit from clearer procedures, applying the principles that promote the creation and adoption of a common vision, culture and behaviour by the team. The successful application of Framework Alliance Contract 1 in the UK and internationally, as a collaborative commercial model, has evidenced how it can respond to such a need by empowering the parties involved to set up and successfully maintain a collaborative working environment.

Mitigating the Challenges of Partner Knowledge Diversity While Enhancing Research & Development (R&D) Alliance Performance: The Role of Alliance Governance Mechanisms

This article explores the answers to the following unresolved research question: How do firms mitigate the collaboration challenges associated with partner knowledge diversity and enhance alliance performance? The study provides an alliance performance enhancing framework by identifying two types of partner knowledge diversity: (1) technology base diversity and (2) R&D process experience diversity, and links them with R&D alliance performance. Additionally, the moderating effects of the two types of alliance governance mechanisms (i.e., interactive and contractual mechanisms) were examined to investigate which alliance governance mechanism is conducive to mitigate the collaboration challenges and enhance alliance performance. Using a data set of 316 alliances in the biopharmaceuticals industry, the study found that a moderate degree (not too low or high) of technology base diversity between alliance partners contributes more to R&D alliance performance. Similarly, there was also an inverted U‐shaped relationship between R&D process experience diversity and alliance performance; too much diversity in R&D process experience may increase the likelihood of partner opportunism, and therefore negatively affect alliance performance. Additionally, the results showed that alliance governance mechanisms played different roles in alliance collaboration; while the contractual alliance mechanisms help reduce relational uncertainty (e.g., opportunism), the interactive mechanisms promoting a more intensive interaction between partners mitigates task difficulty and facilitates complex technology activities. These findings extend the knowledge‐based view (KBV) of strategic alliance and advance research on alliance governance design.

The financing of alliance entrepreneurship

It is popular nowadays for entrepreneurial firms to advance their entrepreneurship outside their boundaries through alliances. This paper studies how the financing of entrepreneurship changes in strategic alliances. We model a financially constrained entrepreneur and a deep-pocket incumbent developing an innovative product through a strategic alliance, which generates externalities on the incumbent. We find that i) in contrast to traditional theories, the entrepreneur's financial constraint can be tightened by an increase in his endowment; ii) an outside investor is introduced as a third party to deal with the free-riding agency problem; and iii) the externalities have a significant effect on the design of financial claims in the alliance contract, and the incentive-compatible financial instruments are consistent with empirical observations.

IMPORTATION OF RELATIONAL PROJECT DELIVERY AGREEMENTS EXPLOITING THE BIM APPROACH IN LEGISLATION

The research proposes an overview of the importation of a Relational Project Delivery Agreement (RPDA) in Italian legislation and the related issues. The AEC sector fragmentation, caused by an increase of building complexity and a change in the industry structure, is demanding a collaborative approach to the project to allow the possibility of a holistic vision based on a BIM approach. This work provides an overview of RPDAs applications on different contexts, highlighting benefits and issues related, including litigation resolution processes. A special focus has been kept in an Italian context, where the stagnant construction market needs to be revolutionized, and better interactions among stakeholders are required. The research imports and adapts an alliance agreement, FAC-1 (Framework Alliance Contract), on Italian framework, tailoring the most important features of the model to the Italian legislation. The goal of this work is providing a methodology to validate a standard form of contract, aiming at an added value to construction sector. Further developments consist in guidelines for contract management and evaluation of the project behavior during different phases of the process.

ICE’s new NEC4 Alliance Contract set to move collaborative procurement to the next level

ICE’s collaborative-style NEC contract, now in its 25th year, is the infrastructure procurement route of choice in the UK, Hong Kong, South Africa and New Zealand. Ian Heaphy of the NEC4 Contract Board introduces the latest member of the family, the NEC4 Alliance Contract.