Interfirm Collaboration, Ownership Stakes and Incomplete Contracts: Evidence From the Pharmaceutical Industry
4 Jun 2024
12:30 -14:30
Times are shown in local time.
Open to: All
Castle Teaching Room (Cambridge Judge Business School)
Trumpington St
Cambridge
CB2 1AG
United Kingdom
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About the seminar topic
Speaker: Professor Matthew Billett, Kelley School of Business, Indiana University
If contracts are incomplete, ownership stakes between collaborating firms can help align incentives and mitigate the costs of potential future conflicts. Using the unique institutional setting of the pharmaceutical industry, we argue that these costs are an inverted U-shaped function of the collaborative drug’s likelihood of approval. Using a sample of collaborations between pharmaceutical firms and detailed drug (project) and firm-level data, we find overwhelming support for our hypothesis. We find equity stakes are more likely when competition is greater and when additional future collaborations occur between the two firms. We conclude that ownership stakes facilitate collaboration.
Speaker bio
Matthew T. Billett holds the Chase Chair in Banking and Finance and is a Professor of Finance at the Kelley School of Business at Indiana University. He earned his PhD in finance from the University of Florida. His research focuses on issues in capital structure, mergers and acquisitions, corporate restructuring, and banking. His work has been published in numerous scholarly journals including the Journal of Business; Journal of Corporate Finance; Journal of Finance; Journal of Financial Economics; Journal of Financial and Qualitative Analysis; Journal of Financial Intermediation; Journal of Marketing; Journal of Money, Credit and Banking; Management Science; and Review of Financial Studies. Prior to becoming a professor, he was a Financial Economist for the Federal Deposit Insurance Corporation (FDIC) in Washington DC. Prior to joining Indiana University, he worked at the University of Iowa and the University of Miami.
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