External technology sourcing: The effect of uncertainty on governance mode choice

Abstract

External knowledge sourcing is increasingly important for corporate entrepreneurship. In this study, we examine the effect of external and relational uncertainty on the governance choice for inter-organizational technology sourcing. We develop a number of hypotheses about the impact of environmental turbulence, technological newness, technological distance and prior cooperation on the choice between different governance modes. Data about external technology sourcing transactions in the pharmaceutical industry do not provide evidence for a continuum from less to more integrated sourcing modes. However, we find that the ranking depends on the type of uncertainty, indicating that firms tackle different types of uncertainty with different governance modes.

How risk influences the choice of governance mode in biopharmaceutical inter-firm relationships

“…This is the reason why, starting from the seminal work of Pisano (Pisano, 1990), several scholars (Folta, 1998;Steensma & Fairbank, 1999;Santoro & McGill, 2005;Rothaermel & Deeds, 2006;Higgins & Rodriguez, 2006;Rosiello, 2007;Dunne, Gopalakrishnan, &, Scillitoe, 2009;de Man & Roijakkers, 2009;Van de Vrande et al, 2009) have used this industry as test-bed for investigating governance form choices in inter-firm relationships.…”

“…In the same way, the lack of trust among partners determines higher behavioural uncertainty, namely relational risk perception, thereby increasing the need for costly monitoring and control of hierarchical governance (Santoro & McGill, 2005). Finally, trust has been deeply investigated as a driver influencing governance form choice in the biopharmaceutical industry (Santoro & McGill, 2005;Delerue, 2004;Van de Vrande et al, 2009). …”

“…At the same time, the lack of inter-firm experience determines a higher perceived relational risk, leading to more structured and integrated governance forms. Finally, both Van de Vrande et al (2009) and Santoro and McGill (2005) use firm's experience in previous relationships as a control variable in studying the choice of governance mode in the biopharmaceutical industry. However, up to now, former inter-firm agreement experience has not been related to relational risk in any empirical study involving the biopharmaceutical industry.…”

Drivers influencing the governance of inter-firm relationships in the biopharmaceutical industry: an empirical survey in the Italian context

“…The papers by Santoro and McGill (2005) and Van de Vrande, Vanhaverbeke, and Duysters (2009) investigate how this different view on transaction uncertainty can influence the choice of a continuum of governance forms between market and hierarchy. Santoro and McGill (2005) analyse the influence of asset co-specialisation, partner and task uncertainty and technology uncertainty on the choice among five different governance forms: one-way licensing, bilateral cross licensing, bilateral non licensing, minority equity and joint ventures (JVs).…”

“…Consistently with RO, technological uncertainty decreases the likelihood of hierarchical governance. Alternatively, Van de Vrande, Vanhaverbeke, and Duysters (2009) analyse the impact of environmental turbulence, technology newness, technology distance and prior ties on five different governance forms: non-equity technology alliances, corporate venture capital (CVC) investments, minority holdings, JVs and M&As. Again, appealing to TCE and RO, they obtain a controversial support to the two theoretical strands.…”