The effect of national culture on partner buyouts in cross-border biotechnology alliances

Abstract

This study examines how national culture influences the likelihood and rate of buyouts among R&D equity alliances and joint ventures in the biotechnology industry. We hypothesize that the interaction of specific national culture attributes and cultural differences between alliance partners have an impact on: (1) the amount of endogenous uncertainty surrounding the potential integration of the target firm and (2) the marginal rate of learning in hierarchical versus collaborative governance. Applying a competing hazard model to a sample of 173 joint ventures and minority equity collaborations in the biotechnology industry, we found that investing firms from high power distance and high uncertainty avoidance countries are more likely to buy out their alliance partners. Furthermore, greater cultural distance between alliance partners increases the likelihood of partner buyout when investing firms are from high power distance countries.