Financial Contracting in Biotech Strategic Alliances

David T. Robinson () and Toby E. Stuart

Journal of Law & Economics, 2007, vol. 50, pages 559-596

Abstract: We analyze 125 strategic alliance contracts, all of which concern early-stage research at small biotechnology research and development companies. Staged investment is ubiquitous, but solutions to agency problems vary. The cycle of equity participation in alliances resembles what we observe in venture capital contracts: they involve convertible equity and sometimes contain antidilution provisions, warrants, and board seats. Contracts rights vary explicitly with the size of the equity stake. Contracts contain explicit provisions linking equity participation to subsequent initial public offerings and contain clauses designed to insulate both parties from multitasking problems. Contracts often specify provisions that are unobservable or difficult to verify, which suggests a role for expected litigation as an enforcement tool in contract design.

Date: 2007
View citations in EconPapers

Downloads: (external link)
http://www.journals.uchicago.edu/cgi-bin/resolve?id=doi:10.1086/519811 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:ucp:jlawec:v:50:y:2007:p:559-596

Ordering information: This journal article can be ordered from
http://www.journals.uchicago.edu/JLE/order1.html

Access Statistics for this article

Journal of Law & Economics is edited by Dennis W. Carlton, Austan Goolsbee, Randall S. Krosner, Douglas Lichtman and Edward A. Snyder

More articles in Journal of Law & Economics from University of Chicago Press
Address: The University of Chicago Press, Journals Division, P.O. Box 37005 Chicago, IL 60637
Series data maintained by Christopher F. Baum ().