Financial Contracting in Biotech Strategic Alliances

David Robinson and Toby E. Stuart

Journal of Law and Economics, 2007, vol. 50, issue 3, 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
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (48)

Downloads: (external link)
http://dx.doi.org/10.1086/519811 (text/html)
Access to the online full text or PDF requires a subscription.

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

DOI: 10.1086/519811

Access Statistics for this article

More articles in Journal of Law and Economics from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().