Administrative mechanisms in alliance governance

Shivaram V Devarakonda, Purdue University


In this dissertation, I study instruments of administrative control and their effects on protecting value when firms collaborate. I develop new arguments to clarify theoretical understanding about administrative control in strategic alliances, and provide systematic evidence about the prevalence, rationale and influence of specific control mechanisms designed to govern collaborations. In particular, I examine what considerations determine the inclusion of control instruments, that is joint committees and board membership for the partner, in the governance structure of strategic alliances. I also investigate how these control mechanisms safeguard partnering firms against knowledge misappropriation. In the three studies that constitute this dissertation, I find evidence that anticipated monitoring and coordinated adaptation needs drive the structuring of control mechanisms. I also find evidence that control mechanisms have important consequence for knowledge leakage, particularly when the partners ability and incentives to misappropriate increase. These findings have important implications for the design and management of strategic alliances, as well as for the broader stream of research on the governance of hybrid organizational forms.^ In the first study, I consider the contractual delegation of specific authority to a dedicated structural interface, which can help partners guide their interactions, address contingencies that arise, and mitigate conflict. I argue and show that partners establish steering committees in response to their monitoring and coordinated adaptation needs. Specifically, based on an analysis of the design of nonequity alliances in the biopharmaceutical industry, I find that partners are more likely to employ a steering committee when a collaborator is able to appropriate its technology, technological uncertainty is higher, or the alliance requires significant coordination. I also empirically distinguish administrative control and incentives as the principal dimensions of formal governance supporting adaptation needs in collaborative agreements. ^ The second study examines the consequences of incorporating administrative controls into nonequity collaborations and how such controls affect knowledge transfers between partners. I demonstrate the role of administrative control in affecting knowledge transfer in alliances. By showing the direct knowledge transfer implications of administrative structures in partnerships, this study extends alliance governance research beyond the implications of the equity-nonequity dichotomy to consider the wider gamut of governance instruments. Moreover, this study lends support to the argument that administrative controls are critical for mitigating appropriation hazards in R&D; alliances.^ In the final study, I examine boards in minority equity partnerships. These partnerships are equity alliances in which one of the partners makes a minority investment (i.e., less than 50 percent ownership) in a partner firm. Investing partners sometimes also secure board seats with voting rights or observational rights. The objective of this research is to analyze the antecedents of board-level monitoring by investors as a facet of formal governance in such partnerships. Drawing on insights from organizational economics, I argue that safeguarding against partner opportunism and protecting the investee's proprietary knowledge determine whether or not an investor secures a seat on the investee partner's board. Finding from analyses of a sample of R&D; collaborations in the biotechnology industry provide supporting evidence on the drivers of board-level monitoring in minority equity partnerships.^




Jeffrey J. Reuer, Purdue University.

Subject Area

Business Administration, General|Business Administration, Management|Economics, Commerce-Business

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