Inter-firm alliance portfolio distance and the partners’ preferences for the distal governance modes to manage endogenous uncertainty in the biotechnology sector

Abstract

Inter-firm alliances play a pivotal role in the swiftly evolving high-tech landscape, yet they often introduce uncertainty, especially when partners have varying degrees of asymmetry. This study explores the dynamics of such alliances, focusing on endogenous uncertainty (technology and partner-specific) over external factors (culture and institutions). We investigate whether the alliance portfolio distance between partners aligns with distal governance modes, which refers to the continuity from the upfront payment mode to equity investments on the timeline. Furthermore, does the investor’s comparative position influence this alignment between construed uncertainty and governance modes? Drawing on Construal Level Theory (CLT), inter-partner distance corresponds to high-level construal in distal governance modes, while proximity aligns with low-level construal in proximal modes. The analysis includes 13,000 biotechnology sector alliance events across 1,700 firms in 29 countries over a decade. Findings reveal a shift in governance mode preferences from the concrete and proximal (upfront) to abstract and distal (equity), touching milestones and licensing in the middle. The investor’s lead in the alliance portfolio asymmetry further strengthens the preference for abstract modes in the distal and high abstract construal levels. This study advances CLT as a framework, offers an integrated approach, and highlights a preference for high-value tech collaborations despite increased cost and risk over temporal and abstract governance conditions.

Keywords:

• Inter-firm alliance portfolio distance
• inter-partner asymmetries
• endogenous uncertainty
• distal governance modes
• abstract-concrete mindset
• high vs. low-level construal
• biopharmaceutical sector
• construal level theory

Notes

1 This section in the framework is advised by one of the reviewers.

Additional information

Notes on contributors

Tariq H. Malik

Tariq H. Malik is a Professor of Management and Innovation Studies at Liaoning University in Shenyang, Liaoning Province. He is the founding direct of research centre in China, Singapore and the UK. He received his masters from University of Wales and Manchester Business School, and PhD from Birkbeck College, University of London, UK. He moved from the UK to Singapore and then to China, and since 2010, he has been progressing in interdisciplinary in China and elsewhere. Tariq has published in most innovation leading journals: Research Policy, Technological Forecasting and Social Change, Technovation, Technology Analysis and Strategic Management, International Business Review, Cross-Cultural Research, Journal of Knowledge Economy, and Current Psychology on innovation projects of clinical trials on music therapies as well as learning questions (discovery vs presented). He is currently on the editorial board of four journals listed in ABCD ranked publications. He is also co-executive editor of DESD (Digital Economy and Sustainable Development) affiliated with his home university. Tariq is cofounding life member of WINIR (World Interdisciplinary Network for Institutional Research), he has written creative works of art, and he is developing his earlier fictions into digital products for entertainment industries. He is founding direct of ICOIS (International Centre for Organisation and Innovation Studies), and he has founded an unsuccessful biotechnology enterprise in the late 1990s with the aim to shift to bio lubricant from fusel lubricants.