Prof. Matthew Higgins (Georgia Tech)

Program

• Date: 28.08.2009
  Time: 11:00 - 12:30
  Location: Room 202, Kaulbachstr. 45

Strategic alliance contracts: An overview of ex ante preferences for control rights

This paper draws on a new set of data on firm’s ex ante preferences for control rights. Much of the theoretical work has been focused on understanding how uncertainty and information asymmetries affect the structure of agreements. However, empirical work that has shown that financial constraints of research-intensive firms appear to be the primary determinant of how rights get allocated (e.g., Lerner, Shane, & Tsai, 2003; Higgins, 2007); smaller, research-intensive firms tend to give up more rights, even though the theory predicts that the greater importance of their marginal contribution means that they should retain more.  That said, most of the empirical literature to date has used actual contracts and the allocations observed are the result of the negotiation process. This paper uses unique survey data to uncover the ex ante preferences for rights.  Our results suggest that ex ante preferences for rights are consistent with theoretical predictions (e.g., Aghion and Tirole, 1994). In addition to overall rights allocations, we detected bundles of preferences: one bundle depicting payment terms, one bundle which we named flexibility rights and one bundle related to downstream rights. So far, our preliminary results allow us to point to inequality and dependence between rights.