Strategic Management of
Technological Innovation
Melissa Schilling
Chapter 8
COLLABORATION STRATEGIES
The XenoMouse
• Abgenix spent seven years and $40 million to produce a
genetically-engineered mouse that could produce
antibodies that would treat human illnesses.
• One antibody, ABX-EGF showed great promise for treating
several types of cancer. Abgenix had to decide whether to:
– License ABX-EGF to a pharmaceutical company which
would do all further testing and commercialization (bear
little risk and receive license royalties)
– Use a joint venture with a biotechnology company to
complete the testing and commercialization (bear
moderate risk and split profits)
– Pursue the ABX-EGF project as a solo venture (bear all
risks and keep all profits)
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Overview
• Firms must often choose between performing
innovation activities alone or in collaboration.
• Collaboration can enable firms to achieve more,
at a faster rate, and at less cost and risk.
• However, collaboration also entails sharing
control and rewards, and may risk partner
malfeasance.
• The advantages of going solo are compared with
those of collaborating, and then different forms
of collaboration are compared.
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Reasons for Going Solo
• Whether a firm chooses to engage in solo development or
collaboration will be influence by:
– Availability of capabilities (does firm have needed
capabilities in house? Does a potential partner?)
• In 1970s Monsanto developed powerful herbicide, but killed
plants unless applied very carefully. Needed to develop plants
that could resist herbicide to make it easier to apply and use
in larger quantities. Biotech industry still quite young and no
appropriate partners who had this knowledge. Monsanto
went solo.
– Protecting proprietary technologies (how important is
it to keep exclusive control of the technology?)
• Abgenix needed cash and access to development and
marketing capabilities it did not have but would have to give
up exclusive control over the drugs developed.
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Reasons for Going Solo
– Controlling technology development and use (how
important is it for firm to direct development process and
applications?)
• Honda did not join the Alliance of Automobile Manufacturers
which was fighting against tougher fuel and emission
standards
– Pragmatic reasons: felt it would limit their discretion over its
development of environmentally friendly autos which Honda
wanted to be a leader in
– Cultural reasons: Honda’s culture emphasized retaining
complete control over the firm’s technology development and
direction. Honda President Yoshino – “it’s better for a person to
decide about his own life rather than having it decided by
others.”
– Building and renewing capabilities (is the project key
to renewing or developing the firm’s capabilities?)
• Boeing philosophy about development of the Sonic Cruiser
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Advantages of Collaborating
• Collaborating can offer the following advantages:
•
•
•
•
•
Obtaining needed skills or resources more quickly
Reducing asset commitment and increase flexibility
Learning from partner
Sharing costs and risks
Can build cooperation around a common standard
Worldwide formation of strategic technology alliances is rising.
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Types of Collaborative Arrangements
• There are numerous types of collaborative arrangements, each with its
own advantages or costs.
– Strategic Alliances: formal or informal agreements between two
or more organizations (or other entities) to cooperate in some way.
Doz and Hamel note that a firm’s alliance strategy might emphasize
combining complementary capabilities or transferring capabilities. It
might also emphasize individual alliances or a network of alliances.
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Types of Collaborative Arrangements
– Joint Ventures: A particular type of strategic alliance
that entails significant equity investment and often
establishes a new separate legal entity.
– Licensing: a contractual arrangement that gives an
organization (or individual) the rights to use another’s
intellectual property, typically in exchange for royalties.
– Outsourcing: When an organization (or individual)
procures services or products from another rather than
producing them in-house.
– Collective Research Organizations: Organizations
formed to facilitate collaboration among a group of
firms.
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Research Brief
Using Alliances and Licensing to Establish a Standard
Charles Hill
describes a range
of strategies
designed to help
a firm’s
technology
become
dominant.
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Choosing a Mode of Collaboration
• Firms should match the trade-offs of a
collaboration mode to their needs.
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Choosing and Monitoring Partners
• Partner Selection
– Resource fit: How well does the potential partner fit the
resource needs of the project? Are resources complementary or
supplementary?
– Strategic fit: Does the potential partner have compatible
objectives and styles?
– Impact on Opportunities and Threats: How would
collaboration impact bargaining power of customers and
suppliers, degree of rivalry, threat of entry or substitutes?
– Impact on Internal Strengths and Weaknesses: Would
collaboration enhance firm’s strengths? Overcome its
weaknesses? Create a competitive advantage?
– Impact on Strategic Direction: Would the collaboration help
the firm achieve its strategic intent?
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Choosing and Monitoring Partners
• Partner Monitoring and Governance
– Successful collaborations require clear yet flexible
monitoring and governance mechanisms.
• May utilize legally binding contractual arrangements.
– Helps ensure partners are aware of rights and obligations.
– Provides legal remedies for violations.
• Contracts often include:
– 1. What each partner is obligated to contribute.
– 2. How much control each partner has in arrangement.
– 3. When and how proceeds of collaboration will be
distributed.
– 4. Review and reporting requirements.
– 5. Provisions for terminating relationship.
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