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Title: Property rights as investment incentives: The contractual structure of R&D activities in biopharmaceutical industry
Authors: LI GANG
Keywords: property right theory, transaction cost economics, biopharmaceutical industry, governance structure, organizational context, alliance performance
Issue Date: 21-Oct-2008
Citation: LI GANG (2008-10-21). Property rights as investment incentives: The contractual structure of R&D activities in biopharmaceutical industry. ScholarBank@NUS Repository.
Abstract: In this dissertation, I argued that the Transaction Cost Economics (TCE) and the Property Right Theory (PRT)are two distinct theories; the former assumes that integration results in unified management while the latter assumes that the investment decisions remain decentralized after integration. I argued that the explanatory power of the two theories depends on the context of a transaction. I found support for falsifiable hypotheses that were developed based on above arguments by studying the governance structures of 285 R&D projects in the biopharmaceutical industry. The PRT argues that opportunism exists in all kinds of organizational forms. In an alliance, the optimal way of allocating property rights is to assign them to the party whose investments critically affect the alliance performance. However, the party with greater bargaining power tends to grab more property rights. As a result, the actual allocation of property rights often deviates from the optimal way specified by the PRT. By studying 222 biotech-pharmaceutical alliances, I found that the bargaining power of a party is positively correlated with property rights assigned to her. I also found that the prior interactions and the density of indirect channels between partners contain the negative impact of misallocating property rights on alliance performance.
Appears in Collections:Ph.D Theses (Open)

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