Faculty Scholarship
 

Authors

D. Gordon Smith

Keywords

Strategic alliances, opportunism, lock in, deadlock, exit

Document Type

Symposium

Abstract

Today, many biotechnology firms use strategic alliances to contract with other companies. This article contends that the governance structure of these alliances - specifically, the contractual board - provides an integrated restraint on opportunism. While an alliance agreement's exit structure could provide a check on opportunism by allowing the parties to exit at will, such exit provisions also can be used opportunistically. Most alliance agreements, therefore, provide for contractual lock in of the alliance partners, with only limited means of exit. Lock in, of course, raises its own concerns, and the contractual board - which typically is composed of representatives from each alliance partner, each wielding equal power - addresses these concerns about opportunism via the potential for deadlock.

General Notes

For “Uncorporation: A New Age?”, sponsored by the University of Illinois College of Law, Chicago, Illinois on April 23, 2005.