“Signaling and Bargaining for Value: How VC Affiliations Affect R&D Partnerships” by Professor Jeffrey J. REUER
Professor Jeffrey J. REUER
Guggenheim Endowed Chair
Professor of Strategy and Entrepreneurship
Leeds School of Business
University of Colorado Boulder
This paper investigates the sources of bargaining power that new ventures can derive from their affiliations and the implications for value appropriation in factor market exchanges. Specifically, we examine how affiliations with venture capitalists (VCs) affect the payments that new ventures receive in R&D agreements. Our theory suggests that affiliations with VCs can enhance new ventures’ alliance terms through the intermediary and signaling functions of such affiliations. We advance signaling theory in management not only by developing the bargaining power implications of new ventures’ affiliations, but by showing how the bargaining environment of inter-organizational exchanges shapes the consequences of these signals. Empirical evidence from R&D partnerships involving new ventures in the biotechnology industry demonstrates how affiliations with VCs can help new ventures capture value from their innovative capabilities and technologies through alliance contracts.