Biomedical Engineering Reference
In-Depth Information
Alliance modes for biotech fi rms . Using a different nomenclature of alliance modes
(upstream, horizontal, and downstream), Rothaermel and Deeds ( 2006 ) examine the
new product output of 325 biotech fi rms participating in 2,226 alliances. Upstream
alliances are defi ned as those with research universities or nonprofi t institutions,
when the goal is to tap into leading-edge scientifi c discoveries and develop them for
commercial purposes; horizontal alliances are those with biotech peers or other tech-
nology ventures, whereby fi rms intend to combine complementary assets, realize
economies of scale, and advance products to clinical trials or to the early stages of new
drug commercialization; downstream alliances are those with established pharmaceu-
tical fi rms, with the purpose of gaining access to manufacturing, regulatory, and mar-
keting knowledge (Rothaermel and the Deeds 2006 ). Consequently, the three alliance
modes differ by partner type, goals, and the nature of transferred knowledge.
The results of that study show that the biotech fi rms' limited capability for alli-
ance management is exhausted the fastest with upstream alliances, followed by
horizontal, and then by downstream alliances, in this order. Upstream alliances,
with their intrinsic transfer of tacit, complex, ambiguous knowledge of uncertain
value, are the most taxing on a biotech fi rm. A fi rm's potential to simultaneously
engage in a number of upstream alliances is fairly low. In contrast, with downstream
alliances, the drug formula has been discovered and the drug has been created, so
the level of transferred knowledge ambiguity and complexity is at its lowest. Hence,
downstream alliances are the least taxing on a fi rm's alliance management capacity,
and a fi rm can afford to handle a higher number of these. This suggests that a biotech
fi rm can participate in a greater number of downstream alliances relative to upstream
alliances. Horizontal alliances hold the middle ground—with them, the knowledge
shared between the partners is more specifi c, application-oriented, and easier to
assimilate compared to fundamental science, although it remains less structured
than the knowledge necessary for commercialization. Hence, in this case the burden
on a fi rm's alliance management resources is lower compared to upstream alliances,
but higher than that in downstream alliances.
Diminishing marginal returns in innovation output associated with high levels of
alliance activity are found in all three alliance types, but the locations of the turning
points differ. The tolerance threshold is the lowest when the fi rm has multiple
upstream partners. It is higher with numerous horizontal partners, and is the highest
in case of multiple downstream ones. Consequently, fi rms can afford to engage in
more horizontal alliances compared to upstream ones and can manage an even
greater number of downstream alliances (Rothaermel and Deeds 2006 ).
Selection of partners . In a study of 69 alliances between pharmaceutical and biotech
companies, Lane and Lubatkin ( 1998 ) contend that the overall performance of an
alliance is best explained not so much by the absolute absorptive capacity of the
downstream partner (the pharmaceutical fi rm), but by the downstream partner's rela-
tive absorptive capacity that is idiosyncratic to the partnership dyad and stems from
similarities with the biotech partner's: (a) basic knowledge—scientifi c, technical,
and academic; (b) knowledge-processing systems; and (c) commercial objectives
(the dominant logic in new product development). In other words, to be effective in
interorganizational learning, the alliance partners must share similar theoretical and
Search WWH ::




Custom Search