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COLLABORATION STRATEGIES

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Title: COLLABORATION STRATEGIES


1
Strategic Management of Technological Innovation
Melissa Schilling
Chapter 8 COLLABORATION STRATEGIES
2
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)

3
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.

4
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.

5
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 Hondas culture emphasized
    retaining complete control over the firms
    technology development and direction. Honda
    President Yoshino its 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 firms
    capabilities?)
  • Boeing philosophy about development of the Sonic
    Cruiser

6
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.
7
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 firms alliance
strategy might emphasize combining complementary
capabilities or transferring capabilities. It
might also emphasize individual alliances or a
network of alliances.
8
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
    anothers 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.

9
Research Brief
  • Using Alliances and Licensing to Establish a
    Standard

Charles Hill describes a range of strategies
designed to help a firms technology become
dominant.
10
Choosing a Mode of Collaboration
  • Firms should match the trade-offs of a
    collaboration mode to their needs.

11
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 firms strengths?
    Overcome its weaknesses? Create a competitive
    advantage?
  • Impact on Strategic Direction Would the
    collaboration help the firm achieve its strategic
    intent?

12
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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