DISCLOSING MONETARY TERMS OF R&D ALLIANCES

Authors

  • Edward Levitas Sheldon B. Lubar College of Business, University of Wisconsin-Milwaukee, Milwaukee, WI 53202 https://orcid.org/0000-0003-0427-989X
  • Sarthak Singh Sheldon B. Lubar College of Business, University of Wisconsin-Milwaukee, Milwaukee, WI 53202
  • M. Ann McFayden College of Business, The University of Texas at Arlington, Arlington, TX 76019
  • Mujtaba Ahsan Fowler College of Business, San Diego State University, San Diego, CA 92182

DOI:

https://doi.org/10.29121/ijetmr.v11.i9.2024.1486

Keywords:

R&D, Alliances, Signaling, Biotechnology, Pharmaceutical

Abstract

We investigate how biotechnology and pharmaceutical R&D alliances operating in an emerging and uncertain environment affects the partner’s decisions to provide unmandated alliance monetary terms. We identify factors promoting R&D alliance partners' desire to disclose monetary arrangements, and factors compelling firms to conceal these arrangements. Voluntarily disclosed monetary arrangements of R&D alliances may impact the overall success of the alliance, partners' performance independent of the alliance, and future R&D costs. Disclosure likely lowers the future cost of capital for certain partners, reducing future R&D costs; yet, disclosure may inadvertently provide proprietary information to competitors. Biotechs seek partnership with pharmaceuticals with established track records in getting drugs to market. Pharmaceuticals seek partnerships with biotechs possessing skills, (i.e. R&D research). We contend the biotech partner's stock price uncertainty and near-term financial capital needs and the larger pharmaceutical firm's market experience will impact the decision to disclose alliance monetary arrangements. We find support for our hypotheses using Probit regressions.

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Published

2024-09-27

How to Cite

Levitas, E., Singh, S., McFayden, M. A., & Ahsan, M. (2024). DISCLOSING MONETARY TERMS OF R&D ALLIANCES. International Journal of Engineering Technologies and Management Research, 11(9), 29–45. https://doi.org/10.29121/ijetmr.v11.i9.2024.1486