Formal international contracts in the presence of cultural distance: An empirical analysis of biopharmaceutical alliances

摘要

Formal contracts are designed to manage the moral hazard issues and inherent risks that come with relationships between organizations. These contracts play an important role in nonequity international alliances, where greater cultural distance between the partners gives rise to more uncertainty in the relationship. At the same time, the contract is the outcome of a negotiation process, and this process is affected by the cultural distance between the partners. This article addresses whether cultural distance affects contract design and content. Rather than test an established model, we use an inductive approach to conduct a detailed empirical analysis of 135 two-party international research-and-development contracts for clinical development in the biopharmaceutical industry. The results show that cultural distance wields complex effects on the contract and its content. They also indicate that a contract will be less detailed—with fewer monitoring clauses and a narrower definition of the collaborative scope—when the partnering firms operate in highly distant national cultures.