Hostname: page-component-586b7cd67f-2plfb Total loading time: 0 Render date: 2024-11-27T11:24:25.377Z Has data issue: false hasContentIssue false
  • English
  • Français

The impact of different forms of IPO firm legitimacy on the choice of alliance governance structure

Published online by Cambridge University Press:  02 February 2015

Joseph E Coombs ,
Paul E Bierly III  and
Scott Gallagher
Joseph E Coombs
Affiliation:
School of Business, Virginia Commonwealth University, Richmond, VA, USA
Paul E Bierly III
Affiliation:
James Madison University, College of Business, Harrisonburg, VA, USA
Scott Gallagher
Affiliation:
James Madison University, College of Business, Harrisonburg, VA, USA
Get access Rights & Permissions [Opens in a new window]

Abstract

We analyze the effects of four different types of firm legitimacy – managerial, technological, local community legitimacy and business press endorsement – on the choice of alliance governance structure in partnerships with newly public biotechnology firms. We expand current research to differentiate between non-equity, minority equity and joint venture alliance structures. We find that initial public offering of stock (IPO) firms with higher levels of managerial legitimacy and local community legitimacy are more likely to enter into joint ventures than minority equity alliances and non-equity alliances. IPO firms with higher technological legitimacy and business press endorsement are more likely to use a less hierarchical governance structure.

Keywords

firm legitimacystrategic alliancesalliance governance structure
Type
Research Article
Information
Journal of Management & Organization , Volume 18 , Issue 4 , July 2012 , pp. 516 - 536
Copyright
Copyright © Cambridge University Press and Australian and New Zealand Academy of Management 2012

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Almeida, P., Dokko, G., & Rosenkopf, L. (2003). Start-up size and the mechanisms of external learning: Increasing opportunity and decreasing ability? Research Policy, 32, 301–315.Google Scholar
Alvarez, S. A., & Barney, J. B. (2001). How entrepreneurial firms can benefit from alliances with large partners. Academy of Management Executive, 15, 139–148.Google Scholar
Argyres, N. S., & Silverman, B. S. (2004). R&D, organization structure and the development of corporate technological knowledge. Strategic Management Journal, 25, 929–958.Google Scholar
Arrow, K. (1962). Economic welfare and the allocation of resources for invention. In National Bureau of Economic Research (Ed.), The rate and direction of inventive activity (pp. 609–625). Princeton, NJ: Princeton University Press.Google Scholar
Audia, P. G., Freeman, J. H., & Reynolds, P. D. (2006). Organizational foundings in community context: Instruments manufacturers and their interrelationship with other organizations. Administrative Science Quarterly, 51, 381–419.Google Scholar
Bantel, K. A., & Jackson, S. E. (1989). Top management innovations in banking: Does the composition of the top management team make a difference? Strategic Management Journal, 10, 107–124.Google Scholar
Barker, V. L. III., & Mueller, G. C. (2002). CEO characteristics and firm R&D spending. Management Science, 48, 782–801.Google Scholar
Beatty, R., & Ritter, J. (1986). Investment banking, reputation and the underpricing of initial public offerings. Journal of Financial Economics, 15, 213–232.Google Scholar
Bierly, P. E., & Coombs, J. E. (2004). Equity alliances, stages of product development, and alliance instability. Journal of Engineering and Technology Management, 21, 191–214.Google Scholar
Bierly, P. E., & Gallagher, S. R. (2007). Explaining alliance partner selection: Fit, trust, and strategic expediency. Long Range Planning, 40, 134–153.Google Scholar
Bierly, P. E., & Kessler, E. H. (1998). Governance of interorganizational partnerships: A comparison of US, European and Japanese alliances in the pharmaceutical industry. In Hitt, M. A., Ricart, J. E., & Nixon, R. D. (Eds.), Managing strategically in an interconnected world (pp. 185–206). Chichester, England: Wiley.Google Scholar
Burt, R. S. (1983). Corporate profits and cooptation. New York, NY: Academic Press.Google Scholar
Chaganti, R., DeCarolis, D., & Deeds, D. L. (1996). Predictors of capital structure in small ventures. Entrepreneurship Theory and Practice, 20, 7–18.Google Scholar
Chahine, S., Filatotchev, I., & Zahra, S. A. (2011). Building perceived quality of founder-involved IPO firms: Founders' effects on board selection and stock market performance. Entrepreneurship Theory and Practice, 35(2), 319–335.Google Scholar
Certo, S. T. (2003). Influencing initial public offering investors with prestige: Signaling with board structures. Academy of Management Review, 28, 432–446.Google Scholar
Cockburn, I., & Griliches, Z. (1988). Industry effects and appropriability measures in the stock market's valuation of R&D and patents. American Economic Review, 78, 419–423.Google Scholar
Cockburn, I. M., & Henderson, R. M. (1998). Absorptive capacity, coauthoring behavior, and the organization of research in drug discovery. Journal of Industrial Economics, 46, 157–182.Google Scholar
Cockburn, I. M., Henderson, R. M., & Stern, S. (2000). Untangling the origins of competitive advantage. Strategic Management Journal, 21, 1123–1145.Google Scholar
Cohen, B. D., & Dean, T. J. (2005). Information asymmetry and investor valuation of IPOs: Top management team legitimacy as a capital market signal. Strategic Management Journal, 26, 683–690.Google Scholar
Contractor, F. J. & Lorange, P. (1988). Cooperative Strategies in International Business. Lexington, MA: Lexington BooksGoogle Scholar
Coombs, J. E., & Bierly, P. E. (2006). Measuring technological capability and performance. R&D Management, 36, 421–438.Google Scholar
Das, T. K., & Teng, B. S. (1996). Risk types and interfirm alliance structures. Journal of Management Studies, 33, 827–843.Google Scholar
Das, T. K., & Teng, B. S. (1998). Between trust and control: Developing confidence in partner cooperation in alliances. Academy of Management Review, 23, 491–512.Google Scholar
DeCarolis, D. M., & Deeds, D. L. (1999). The impact of stocks and flows of organizational knowledge on firm performance: An empirical investigation of the biotechnology industry. Strategic Management Journal, 20, 953–968.Google Scholar
Deeds, D. L., DeCarolis, D., & Coombs, J. E. (1997). The impact of timing and firm capabilities on the amount of capital raised in an initial public offering: Evidence from the biotechnology industry. Journal of Business Venturing, 12, 31–46.Google Scholar
Deeds, D. L., Mang, P. Y., & Frandsen, M. (2004). The influence of firms' and industries' legitimacy on the flow of capital into high-technology ventures. Strategic Organization, 2, 9–34.Google Scholar
Deephouse, D. L. (1996). Does isomorphism legitimate? Academy of Management Journal, 39, 1024–1039.Google Scholar
Deephouse, D. L., & Carter, S. M. (2005). An examination of differences between organizational legitimacy and organizational reputation. Journal of Management Studies, 42, 329–360.Google Scholar
Dowling, J., & Pfeffer, J. (1975). Organizational legitimacy: Social values and organizational behavior. Pacific Sociological Review, 18, 122–136.Google Scholar
Eisenhardt, K. M., & Schoonhoven, C. B. (1996). Resource-based view of strategic alliance formation: Strategic and social effects in entrepreneurial firms. Organization Science, 7, 136–150.Google Scholar
Finkelstein, S., & Hambrick, D. C. (1996). Strategic leadership: Top executives and their effects on organizations. St. Paul, MN: West.Google Scholar
French, J., & Raven, B. (1959). The bases of social power. In Cartwright, D. (Ed.), Studies in social power (pp. 150–167). Ann Arbor, MI: University of Michigan Press.Google Scholar
Grant, R. M. (1996). Prospering in dynamically-competitive environments: Organizational capability as knowledge integration. Organization Science, 7, 375–388.Google Scholar
Grant, R. M., & Baden-Fuller, C. (2004). A knowledge accessing theory of strategic alliances. Journal of Management Studies, 41, 61–83.Google Scholar
Griliches, Z. (1990). Patent statistics as economic indicators: A survey. Journal of Economic Literature, 28, 1661–1707.Google Scholar
Gronholt-Pedersen, J., & Stynes, T. (2010, 07 29). Conoco will sell full Lukoil stake. The Wall Street Journal, p. B2.Google Scholar
Gulati, R. (1995a). Does familiarity breed trust? The implications of repeated ties for contractual choice in alliances. Academy of Management Journal, 38, 85–112.Google Scholar
Gulati, R. (1995b). Social structure and alliance formation patterns: A longitudinal analysis. Administrative Science Quarterly, 40, 619–652.Google Scholar
Gulati, R. (1998). Alliances and networks. Strategic Management Journal, 19, 293–317.Google Scholar
Hagedoorn, J. (1993). Understanding the rationale of strategic technology partnering: Interorganizational modes of cooperation and sectoral differences. Strategic Management Journal, 14, 371–385.Google Scholar
Hagedoorn, J., & Narula, R. (1996). Choosing organizational modes of strategic technology partnering: International and sectoral differences. Journal of International Business, 27, 265–284.Google Scholar
Hambrick, D., & Mason, P. (1984). Upper echelons: The organization as a reflection of its top managers. Academy of Management Review, 9, 193–206.Google Scholar
Hamel, G. (1991). Competition for competence and interpartner learning within international strategic alliances. Strategic Management Journal, 12, 83–103.Google Scholar
Henderson, R., & Cockburn, I. (1994). Measuring competence? Exploring firm effects in pharmaceutical research. Strategic Management Journal, 15, 63–84.Google Scholar
Hennart, J. F. (1988). A transaction costs theory of equity joint ventures. Strategic Management Journal, 9, 361–374.Google Scholar
Higgins, M. C., & Gulati, R. (2003). Getting off to a good start: The effects of upper echelon affiliations on underwriter prestige. Organization Science, 14, 244–263.Google Scholar
Higgins, M. C., & Gulati, R. (2006). Stacking the deck: The effects of top management backgrounds on investor decisions. Strategic Management Journal, 27, 1–25.Google Scholar
Hitt, M. A., & Tyler, B. B. (1991). Strategic decision models: Integrating different perspectives. Strategic Management Journal, 12, 327–351.Google Scholar
Hoang, H., & Rothaermel, F. T. (2005). The effect of general and partner-specific alliance experience on joint R&D project performance. Academy of Management Journal, 48, 332–345.Google Scholar
Inkpen, A. C. (1996). Creating knowledge through collaboration. California Management Review, 39(1), 123–140.Google Scholar
Inkpen, A. C. (2000). Learning through joint ventures: A framework of knowledge acquisition. Journal of Management Studies, 37, 1019–1043.Google Scholar
Inkpen, A. C., & Dinur, A. (1998). Knowledge management processes and international joint ventures. Organization Science, 9, 454–468.Google Scholar
Jaffe, A., Trajtenberg, M., & Henderson, R. (1993). Geographic localization of knowledge spillovers as evidenced by patent citations. Quarterly Journal of Economics, 63, 577–598.Google Scholar
Jayaraman, N., Khorana, A., Nelling, E., & Covin, J. (2000). CEO founder status and firm financial performance. Strategic Management Journal, 21, 1215–1224.Google Scholar
Kale, P., Singh, H., & Perlmutter, H. (2000). Learning and protection of proprietary assets in strategic alliances: Building relational capital. Strategic Management Journal, 21, 217–237.Google Scholar
Kogut, B. (1988a). Joint ventures: Theoretical and empirical perspectives. Strategic Management Journal, 9, 319–332.Google Scholar
Kogut, B. (1988b). A study of the life cycle of joint ventures. In Contractor, F. J. & Lorange, P. (Eds.), Cooperative strategies in international business (pp. 169–186). Lexington, MA: Lexington Books.Google Scholar
Kogut, B. (1989). The stability of joint ventures: Reciprocity and competitive rivalry. Journal of Industrial Economics, 38, 183–198.Google Scholar
Kuran, T., & Sunstein, C. (1999). Availability cascades and risk regulation. Stanford Law Review, 51, 683–768.Google Scholar
Laumann, E. O., Galaskiewicz, J., & Marsden, P. V. (1978). Community structure as inter-organizational linkages. Annual Review of Sociology, 4, 455–484.Google Scholar
Liebeskind, J. P., Oliver, A. L., Zucker, L., & Brewer, M. (1996). Social networks, learning and flexibility: Sourcing scientific knowledge in new biotechnology firms. Organization Science, 7, 428–443.Google Scholar
MacMillan, I. C., Siegel, R., & Subbanarisimha, P. N. (1985). Criteria used by venture capitalists to evaluate new venture proposals. Journal of Business Venturing, 1, 119–128.Google Scholar
McCombs, M. E. (1981). The agenda setting approach. In Nimmo, D. & Sanders, K. R. (Eds.), Handbook of political communication (pp. 121–140). Newbury Park, CA: Sage.Google Scholar
McCombs, M., Llamas, J. P., Lopez-Escobar, E., & Rey, F. (1997). Candidate images in special elections: Second-level agenda setting effects. Journalism and Mass Communication Quarterly, 74, 703–717.Google Scholar
Molina-Morales, F. X., & Martinez-Fernandez, M. T. (2010). Social networks: Effects of social capital on firm innovation, Journal of Small Business Management, 48(2), 258–279.Google Scholar
Mowery, D. C., Oxley, J. E., & Silverman, B. S. (1996). Strategic alliances and interfirm knowledge transfer. Strategic Management Journal, 17, 77–91.Google Scholar
Ohmae, K. (1989, 03–April). The global logic of strategic alliances. Harvard Business Review, 143–154.Google Scholar
Oliver, A. L., & Liebeskind, J. P. (1998). Three levels of networking for sourcing intellectual capital in biotechnology. International Studies of Management and Organizations, 27, 76–103.Google Scholar
Osborn, R. N., & Baughn, C. C. (1990). Forms of inter-organizational governance for multinational alliances. Academy of Management Journal, 33, 503–519.Google Scholar
Oxley, J., & Wada, T. (2009). Alliance structure and the scope of knowledge transfer: Evidence from US–Japan agreements. Management Science, 55, 635–650.Google Scholar
Packalen, K. A. (2007). Complementing capital: The role of status, demographic features, and social capital in founding teams' abilities to obtain resources. Entrepreneurship, Theory and Practice, 31, 873–891.Google Scholar
Pakes, A. (1985). On patents, R&D, and the stock market rate of return. Journal of Political Economy, 93, 390–409.Google Scholar
Park, S. H., & Ungson, G. R. (1997). The effect of national culture, organizational complementarity, and economic motivation on joint venture dissolution. Academy of Management Journal, 40, 270–307.Google Scholar
Pfeffer, J., & Salancik, G. R. (1978). The external control of organizations: A resource dependence perspective. New York, NY: Harper & Row.Google Scholar
Pisano, G. P. (1989). Using equity participation to support exchange: Evidence from the biotechnology industry. Journal of Law, Economics and Organization, 5, 109–125.Google Scholar
Pisano, G. P. (1991). The governance of innovation: Vertical integration and collaborative arrangements in the biotechnology industry. Research Policy, 20, 237–249.Google Scholar
Pisano, G. P., & Mang, P. Y. (1993). Collaborative product development and the market for know-how: Strategies and structures in the biotechnology industry. Research on Technological Innovation, Management and Policy, 5, 109–136.Google Scholar
Podolny, J. M., Stuart, T. E., & Hannan, M. T. (1996). Networks, knowledge, and niches: Competition in the worldwide semiconductor industry, 1984–1991. American Journal of Sociology, 102, 659–689.Google Scholar
Pollock, T. G., & Rindova, V. P. (2003). Media legitimation effects in the market for initial public offerings. Academy of Management Journal, 46, 631–642.Google Scholar
Powell, W. W., & Brantley, P. (1992). Competitive cooperation in biotechnology: Learning through networks. In Nohria, N. & Eccles, R. G. (Eds.), Networks and organizations (pp. 366–394). Boston, MA: Harvard Business School Press.Google Scholar
Powell, W. W., Koput, K. W., & Smith-Doerr, L. (1996). Interorganizational collaboration and the locus of innovation: Networks of learning in biotechnology. Administrative Science Quarterly, 41, 116–145.Google Scholar
Rao, H. (1994). The social construction of reputation: Certification contests, legitimization, and the survival of organizations in the American automobile industry (pp. 1895–1912). Strategic Management Journal, 15, 29–44.Google Scholar
Rao, H., Greve, H., & Davis, G. (2001). Fool's gold: Social proof in the initiation and abandonment of coverage by Wall Street analysts. Administrative Science Quarterly, 46, 502–526.Google Scholar
Reuer, J. J., & Arino, A. (2007). Strategic alliance contracts: Dimensions and determinants of contractual complexity. Strategic Management Journal, 28, 313–330.Google Scholar
Roijakkers, N., & Hagedoorn, J. (2006). Inter-firm R&D partnering in pharmaceutical biotechnology since 1975: Trends, patterns, and networks. Research Policy, 35, 431–446.Google Scholar
Rothaermel, F. T. (2001). Incumbent's advantage through exploiting complementary assets via interfirm cooperation. Strategic Management Journal, 22, 687–699.Google Scholar
Rothaermel, F. T., & Deeds, D. L. (2004). Exploration and exploitation alliances in biotechnology: A system of new product development. Strategic Management Journal, 25, 201–221.Google Scholar
Ruef, M., & Scott, W. R. (1998). A multidimensional model of organizational legitimacy: Hospital survival in changing institutional environments. Administrative Science Quarterly, 43, 877–904.Google Scholar
Rutherford, M. W., Buller, P. F., & Stebbins, J. M. (2009). Ethical considerations of the legitimacy lie. Entrepreneurship, Theory and Practice, 33, 949–964.Google Scholar
Santoro, M. D., & McGill, J. P. (2005). The effect of uncertainty and asset co-specialization on governance in biotechnology alliances. Strategic Management Journal, 26, 1261–1269.Google Scholar
Simonin, B. L. (1999). Ambiguity and the process of knowledge transfer in strategic alliances. Strategic Management Journal, 20, 595–623.Google Scholar
Singh, J. V., Tucker, D. J., & House, R. J. (1986). Organizational legitimacy and the liability of newness. Administrative Science Quarterly, 31, 171–193.Google Scholar
Spence, A. (1973). Job market signaling. Quarterly Journal of Economics, 87, 355–379.Google Scholar
Street, C. T., & Cameron, A. (2007). External relationships and the small business: A review of small business alliance and network research. Journal of Small Business Management, 45(2), 239–266.Google Scholar
Stuart, T. E. (1998). Network positions and propensities to collaborate: An investigation of strategic alliance formation in a high-technology industry. Administrative Science Quarterly, 43, 668–698.Google Scholar
Stuart, T. E., Hoang, H., & Hybels, R. C. (1999). Interorganizational endorsements and the performance of entrepreneurial ventures. Administrative Science Quarterly, 44, 315–349.Google Scholar
Teng, B. S., & Das, T. K. (2008). Governance structure choices in strategic alliances: The roles of alliance objectives, alliance management experience, and international partners. Management Decision, 46, 725–742.Google Scholar
Tversky, A., & Kahneman, D. (1974). Judgment under uncertainty: Heuristics and biases'. Science, 185, 1125–1131.Google Scholar
Tyler, B. B., & Steensma, H. K. (1998). The effect of executives' experiences and perceptions on their assessment of potential technological alliances. Strategic Management Journal, 19, 939–965.Google Scholar
Westhead, P. (1995). Survival and employment growth contrasts between types of owner-managed high-technology firms. Entrepreneurship Theory and Practice, 20, 5–27.Google Scholar
Williamson, O. E. (1975). Markets and hierarchies: Analysis and antitrust implications. New York, NY: Free Press.Google Scholar
Williamson, O. E. (1991). Comparative economic organization: The analysis of discrete structural alternatives. Administrative Science Quarterly, 36, 269–296.Google Scholar
Young-Ybarra, C., & Wiersema, M. (1999). Strategic flexibility in information technology alliances: The influence of transaction cost economics and social exchange theory. Organization Science, 10, 439–459.Google Scholar
Zimmerman, M. A., & Zeitz, G. J. (2002). Beyond survival: Achieving new venture growth by building legitimacy. Administrative Science Quarterly, 27, 414–431.Google Scholar
Zucker, L. G., Darby, M. R., & Armstrong, J. (1998). Geographically localized knowledge: Spillovers or markets? Economic Inquiry, 36, 65–81.Google Scholar
Zuckerman, E. W. (1999). The categorical imperative: Securities analysts and the illegitimacy discount. American Journal of Sociology, 104, 1398–1438.Google Scholar