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Valparaiso Univ. Law School

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Sunday, May 22, 2005

Contracts and strategic alliances

Wisconsin's Gordon Smith has a new paper out that will be of particular interest to those who are interested in business associations as well as contracts.  It's called The Exit Structure of Strategic Alliances, and it's forthcoming in the Illinois Law Review.  Here's the 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.

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