Knowledge Based Strategic Alliances and Value Creation: A Study of Biotechnology Firms Quoted on the London Stock Exchange

Societies and economies are continuously transformed by the creation, integration and exploration of new knowledge. In delivering new knowledge intensive products, there is a key question of how firms should organise to achieve success. There is increasing dissatisfaction with the operations of the large hierarchical organisation, which appears to be unable to respond to the need not only for efficient and fast delivery of products in the global marketplace, but also the creation, integration, and exploration of new knowledge to create totally new, or significantly improved, products. It is here that new organsiational forms have arisen, particularly the knowledge based organisational network which links smaller firms with each other and with much large enterprises and institutions. Ar the heart of this network are a form of alliance, which I refer to as a knowledge based alliance. This form of alliance differs from many of its historical ancestors. In these alliances, it is knowledge and intellectual property rights (IPRs) which are exchanged or co-developed and exploited. in contrast, historic alliances emphasised access to markets for products and services, or the supply if downstream production and delivery systems. [...] This paper is unusual in that it is an attempt to make a direct assessment of the value of knowledge based alliances in terms of share performance. An event study by Das et al. (1998) focused on the effects of technological, R&D alliances versus marketing alliances on firm performance. This paper will differ from Das et a. (1998) in that it will not employ a conventional event study method and will concentrate on a single sector, namely UK therapeutic (drug) biotechnology firms. Other empirical studies in the strategy literature which have addressed the issue of knowledge based strategic alliances have tended to focus on variables such as degree of knowledge transfer (Inkpen 1996; Mowery et a. 1996) and longevity of alliances (Barkema et al. 1997; Parkhe 1991)