Best foot forward? The importance of contractual governance mechanisms for innovation from alliances

This paper examines the impact of alliance partners' ex ante governance choices related to knowledge exchange on ex post innovative outcomes. Building on insights from alliance governance, knowledge-based view, and the contracting literatures, the paper argues that partners' ex ante contractual commitments signal their strategic intent towards collaboration that will consequently influence their knowledge exchanges during the alliance. It is hypothesized that a contractual commitment to transfer tacit knowledge and the formation of a joint committee are conducive to the generation of innovative outcomes from the alliance. In addition, a contingency perspective is developed and it is hypothesized that the efficacy of these mechanisms varies depending on the extent of co-development of R&D activities and the technological uncertainty of the alliance. The hypotheses are empirically examined using patenting activity from biopharmaceutical alliances in the United States.