Distance Costs and The Degree of Inter‐Partner Involvement in International Relational‐Based Technology Alliances

• Published date: 01 November 2014
• Author: John Hagedoorn,Hans Kranenburg,Stefanie Lorenz‐Orlean
• DOI: http://doi.org/10.1002/gsj.1085
• Date: 01 November 2014

DISTANCE COSTS AND THE DEGREE OF

INTER-PARTNER INVOLVEMENT IN

INTERNATIONAL RELATIONAL-BASED

TECHNOLOGY ALLIANCES

HANS VAN KRANENBURG1*, JOHN HAGEDOORN2,3, and

STEFANIE LORENZ-ORLEAN2

1Nijmegen School of Management, Institute for Management Research,

Radboud University Nijmegen, Nijmegen, The Netherlands

2School of Business and Economics, Department of Organization and

Strategy, Maastricht University, Maastricht, The Netherlands

3School of Management, Royal Holloway University of London, Egham,

Surrey, United Kingdom

This research studies the effect of specific institutional and distance cost issues, in particular

the protection of intellectual property rights and geographic distance, on the preference of

companies for different governance modalities in terms of the degree of their involvement in

international relational-based technology alliances. In the sample, all technology alliances

contain exclusive technology agreements. We find that international differences in intellectual

property rights protection regimes between the home countries of partnering companies are a

significant factor: the larger the difference, the morelikely that partnering companies prefer to

form an equity relational-based technology alliance with substantial inter-partner involve-

ment. The degree of geographic distance between partners also affects the preference of

companies for a particular form of relational-based agreement. Companies preferto engage in

deeper inter-partner involvement, albeit of a non-equity nature, in case of large geographic

distance between the home countries of the partnering companies. Copyright © 2014 Strategic

Management Society.

INTRODUCTION

The alliance governance literature is moving beyond

the more common dichotomies of governance types

of alliances—such as contrasting contractual to hier-

archical or involving equity joint venture invest-

ments versus non-equity alliances—toward a more

subtle understanding of partner involvement. In that

context, many scholars have used different gover-

nance types to examine the determinants of the legal

or contractual form chosen by the companies at the

time of alliance formation. However, the legal or

contractual form of the alliance is not an end in itself.

Contractor, Woodley, and Piepenbrink (2011)

emphasize that the outcome of the negotiation and

the design of an alliance agreement depend not only

on the legal or contractual form, but also on the

process and intensity of inter-partner involvement.

They show that the interaction or involvement of

partners is necessary to coordinate operations,

improve the efficiency with which knowledge is

transferred, monitor opportunism, maximize joint

synergistic value, and make sure that an appropriate

share of the net benefit created by the alliance is

appropriated by the technology provider (Contractor

Keywords: technology alliances; licensing agreements; prop-

erty rights; geographic distance; governance form; inter-partner

involvement; exclusiveness

*Correspondence to: Hans van Kranenburg, Nijmegen School

of Management, Institute for Management Research, Radboud

University Nijmegen, Nijmegen, P.O. Box 9108, 6500 HK, The

Netherlands. E-mail: h.vankranenburg@fm.ru.nl

Global Strategy Journal

Global Strat. J., 4: 280–291 (2014)

Published online in Wiley Online Library (wileyonlinelibrary.com). DOI: 10.1002/gsj.1085

Copyright © 2014 Strategic Management Society