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RESEARCH PRODUCT

How risk influences the choice of governance mode in biopharmaceutical inter-firm relationships

Giovanni PerroneCarolina BillitteriGiovanna Lo Nigro

subject

MarketingPerformance riskTransaction costOperationalizationRelation (database)Corporate governanceMode (statistics)Settore ING-IND/35 - Ingegneria Economico-GestionaleMicroeconomicsBiopharmaceuticalBiopharmaceutical industry Governance structure Inter-firm relationship Performance risk Relational riskComponent (UML)BusinessBusiness and International ManagementMarketingFinance

description

Abstract This paper proposes a new theoretical framework for assessing the influence of risk in shaping the governance form in biopharmaceutical inter-firm relationships. In particular, we propose a multidimensional operationalization of relational and performance risk and, by following Transaction Cost Economics (TCE) and Real Options (RO) theory constructs, we hypothesize a relation between the aforementioned risk components and the choice of governance form. Specifically, following TCE reasoning, we hypothesize that a high level of relational risk leads towards more hierarchical governance forms, while, following RO theory, we hypothesize that a high level of performance risk leads toward market-oriented governance forms; finally, we hypothesize a moderating effect of each risk component on the other. We empirically test our framework through the analysis of 353 inter-firm relationships signed worldwide between pharmaceutical and biotech companies from 2007 to 2010. The results show substantive support for our theoretical framework. Furthermore, we find a significant moderating effect of the performance risk on the TCE relation between relational risk and governance forms.

yearjournalcountryeditionlanguage
2013-12-01International Business Review
https://doi.org/10.1016/j.ibusrev.2013.01.011