The Allocation of Control Rights in Pharmaceutical Alliances

This project considers the allocation of control rights between pharmaceutical and biotechnology firms. I find that allocations of rights are sensitive to the bargaining position of both firms. In addition, biotechnology firms entering their first alliance tend, on average, to relinquish more rights. I also explore if and when alliances begin to impact pharmaceutical firm shareholder value. On average, the market responds favorably to the announcement of these alliances; however, several factors negatively impact the magnitude of these findings. Overall, the market tends to favor earlier stage alliances which are consistent with an underlying healthy pharmaceutical research pipeline.