The importance of alliances in firm capital structure decisions: evidence form biotechnology firms

Building on finance research, we argue that the ex post hazards arising from alliance formation depend upon the firm’s financial condition. Financial distress jeopardizes the continuity of an alliance and the value of the investments involved. Thus, firms should reduce leverage to signal continued commitment and to induce investments from alliance partners. Accordingly, we find that a firm’s current alliance propensity predicts its subsequent capital structure decisions and that this relationship is most pronounced in the presence of other exchange hazards. Our paper contributes to alliance research and to the growing literature discussing the strategic consequences of capital structure.

The impact of partners’ financial condition on alliance contract design: evidence from biotech-pharma alliances

Financial health and partner attractiveness in the market for inter-firm collaboration

Price dispersion and competition in business routes: An empirical analysis

An empirical analysis of online price dispersion in the Italian airline industry

Firms operating in the electronic marketplace set and adjust prices to affect demand and profitability. In service markets, such as airline markets, different prices are commonly offered by diverse firms to accommodate to a variety of market segments having particular sets of consumer attitudes. This variation in prices is the price dispersion and is based on market distinctiveness deriving from customer heterogeneity as well as the peculiar competition in the specific market arena. In this paper we use a panel dataset from the Italian airline market to investigate the role of competition and different online channels in the emergence of price dispersion. Specifically, we examine the unclea…

EXPLORATION, EXPLOITATION AND INCENTIVES TO INNOVATE: THE DISCIPLINING ROLE OF DEBT

Extant research suggests that when compared to equity, debt financing is less conducive to innovation activities. In this paper we challenge this view by suggesting that although equity sustains innovation by allowing risk-taking and experimentation, it may also encourage the pursuit of exploration at the expense of exploitation. Under these circumstances, the stricter governance associated with debt becomes important as it stimulates managers to shift resources towards exploitation in order to mitigate risk and improve short-term pay-offs. In support of these arguments our empirical analysis shows that, while leverage has a negative impact on standard measures of innovation quantity and qu…

Capital structure decisions in the biotechnology industry: the role of R&D collaborations with pharmaceutical incumbents

This study focuses on the importance of collaborative R&D attitudes of biotech firms in the capital structure determination. Specifically, we investigate the short term impact of R&D agreements on financial leverage and we analyze whether this relationship depends on alliances’ features and the type and characteristics of the partners involved. Our results suggest that agreements with established pharmaceutical incumbents are followed by a reduction in the level of debt, while collaborations with biotech firms do not play a significant role, at least in the short term. However, different explanations are plausible. Our findings could be consistent with an “extension” of the pecking order th…

Price dispersion in the Italian airline industry: the role of competition and online travel agents

THE ROLE OF CAPITAL STRUCTURE IN FIRM’S ALLIANCE STRATEGY

The importance of relation-specific investments in capital structure decision: the case of the biopharmaceutical industry

According to capital structure literature, bilateral relationships with external partners have a strong impact on a firm’s financing decisions because they involve relation-specific investments that would lose most of their value in case of liquidation. By adjusting their capital structure firms can reduce liquidation risks and incentive their partners to undertake such investments. In this paper we extend these arguments to strategic alliances in the context of biotechnology industry, where bilateral relationships are formed to advance the commercialization of innovation and R-S investments are a primary issue. We investigate alliances heterogeneity and analyze whether partnerships possess…

"Alliance Portfolio Diversity, Organizational Slack, and Firm Financial Performance"

We investigate how the availability of slack influences a firm’s ability to deal with alliance portfolio diversity. Alliances with diverse partners provide access to a broader pool of complementary...

The Importance of Alliances in Firm Capital Structure Decisions: Evidence from Biotechnology Firms

Building on finance research, we argue that the ex post hazards arising from alliance formation depend upon the firm's financial condition. Financial distress jeopardizes the continuity of an alliance and the value of the investments involved. Thus, firms should reduce leverage to signal continued commitment and to induce investments from alliance partners. Accordingly, we find that a firm's current alliance propensity predicts its subsequent capital structure decisions and that this relationship is most pronounced in the presence of other exchange hazards. Our paper contributes to alliance research and to the growing literature discussing the strategic consequences of capital structure. Co…

Alliance portfolio diversity, organizational slack, and firm performance

In this paper we analyze whether and how the availability of internal resources in the form of slack influences a firm ability to deal with partner diversity in its alliance portfolio. Alliances with diverse partners provide access to a broader pool of complementary resources, but they also entail significant coordination costs. In this context, we argue that slack acts as a doubleedged sword that can either facilitate or hinder the management of interdependencies among different alliance projects. Accordingly, we further argue that the net impact of slack will depend on the firm’s experience in dealing with the challenges posed by portfolio diversity. Empirical analysis on a sample of firm…

The role of firm capital structure in alliance formation

Price dispersion, competition, and the role of online travel agents: Evidence from business routes in the Italian airline market

Abstract In this article, using data from the Italian airline market, we study the role of online travel agents (OTAs) in driving price dispersion as compared to the effect of airlines’ websites. Specifically, we investigate how distinctive factors between OTAs and airlines’ direct channels influence price dispersion. We find that after controlling for OTAs’ features related to airline competition, price dispersion should be lower in the OTA channel relative to airlines’ direct channels. On the other hand, we also find that OTAs’ features related to the presence of airline competition play in favor of higher price dispersion in such indirect channel.

The role of the distribution platform in price formation of paid apps

In this paper we study the role of the distribution platform as an important determinant of price of paid apps. We also examine how the distribution platform influences the price implications of important developers' app-level decisions. To these purposes, we construct a hierarchical model of price formation by using an ad-hoc panel dataset consisting of top paid apps from the two major app stores, namely Apple's App Store and Google Play. Our findings show that prices of paid apps strongly depend on the platform where the apps are marketed. Specifically, the App Store is associated with lower prices for paid apps than Google Play. We find evidence that this is because the impact of cross-s…

Capital Structure Decisions in the Biopharmaceutical Industry