Governance forms drivers in bio-pharmaceutial inter-firm relationships

Abstract

Networking benefits are acknowledged by many studies in the industrial organization and strategic management fields; transaction cost theory agency and property right theory provide the economic foundations to the market-hierarchy dilemma; while Resource based-view (RBV), relational and evolutionary theories provide the strategic foundation of the inter-firm relationships. All this theoretical strands investigate reasons that push firms to formalize their relationship in different governance structures. The bio-pharmaceutical industry has the characteristics to offer to the potential partners both exploitation or exploration alliances benefits. In particular some elements play a “pivot” role in the bio-pharma industry (number of patents, number of products in the pipeline, forecasted cash flows needs, etc..). Partnering interests between biotechs and pharmas seem symbiotic due to complementary assets and essential to the overall pharmaceutical industry: pharma firms are cash-rich, vertically integrated and innovative poor, meanwhile, biothecs show cash needs to sustain expensive research projects. Many researchers have investigated the bio-pharmaceutical alliances phenomenon; literature review shows a gap in the relationship existing between the process drivers and the specific governance form chosen. The object of this research is to attempt to plug this gap: through the individuation of such linkage the research bring managerial implications in supporting the filtering process of the most promising alliances. We adopt a grounded theory-building approach to explore the linkage between governance forms and pivot elements. As a result we formulated some hypotheses that have been tested on a sample of 48 case studies published in different economics, business and management magazines, journals and newspapers in the last 10 years. Although the explorative character of this research, the results here presented put some lights on the drivers influencing the inter-firm relationship between pharmas and biotechs and provides interesting managerial implications.