Chapter 7: R&D Collaboration and Multimarket Contact: How Overlap and Asymmetry Influence Partner Selection

This study examines how interpartner cooperation can occur between firms who are also rivals in markets outside the alliance domain. Building on recent extensions of multimarket contact theory, I examine how R&D alliances are facilitated by competitive overlap and asymmetry at the partner selection stage. The study is set in the biopharmaceutical industry and competitive overlap and asymmetry are captured, respectively, by the extent to which potential partners’ R&D projects are conducted in the same therapeutic markets and the difference in investment levels therein. By comparing realized alliances between 62 market entrants and 52 incumbents operating in 58 markets with counterfactual dyads involving the same entrants paired with non-allied incumbents, I find that: (1) overlap facilitates the partner selection process due to greater familiarity that reduces partner search costs; and (2) asymmetry decreases the perceived threat of competitive loss due to knowledge appropriation. Taken together, the effects of overlap and asymmetry suggest a pathway based on multimarket contact whereby firms identify and partner with new collaborators despite competitive tension.