Control Rights and the Performance of Strategic Alliances

Abstract

A significant amount of research has addressed strategic alliances however less attention has been paid to how the underlying allocation of control rights within these agreements impacts the performance of alliances. We demonstrate that the theoretical predictions with respect to the allocation of control rights by Aghion and Tirole (1994) have implications for alliance success. Using unique survey data from German biotechnology alliances with pharmaceutical partners we link the ex ante allocation of control rights to ex post alliance success. We find that although incumbent firms are able to draw from more experience and have a larger set of re-sources in place, relinquishing rights to the young and small research intensive partner may be one way to improve alliance performance. Finally, we are able to comment on which rights may be more important in leading to alliance success.