Transaction Costs and Reputation-Based Trust in Biotech Alliances

21 Pages Posted: 2 Jun 2006

See all articles by Rick Aalbers

Rick Aalbers

University of Groningen - SOM Research School; Deloitte Consulting

Lambert van der Laan

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Date Written: January 2006

Abstract

Reputation-based trust, reflecting the time-dependency of trust, influences inter-firm alliances. A literature review resulted in hypotheses which were tested in an empirical study based on a quantitative analysis and in-depth interviews with firms in the bio tech sector of human health in the Netherlands. In high dynamic markets firms use reputation-based trust as an informal coordination mechanism for alliances. However, it does not reduce the necessity of contracts. Reputation results in a decline of overall transaction costs of alliances. Reputation-based trust reduces the uncertainty between alliance partners and the frequency of interaction. It does not result in an increase of asset specific investments.

Keywords: inter-firm alliances, biotech, transaction costs (TCE), trust, reputation

JEL Classification: L14, L65, 037

Suggested Citation

Aalbers, Rick and van der Laan, Lambert, Transaction Costs and Reputation-Based Trust in Biotech Alliances (January 2006). Available at SSRN: https://ssrn.com/abstract=905848 or http://dx.doi.org/10.2139/ssrn.905848

Rick Aalbers

University of Groningen - SOM Research School ( email )

P.O. Box 800
9700 AV Groningen
Netherlands

Deloitte Consulting ( email )

General-Guisan-Quai 38
Zürich, 8022
United States

Lambert Van der Laan (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

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