The Effectiveness of Innovation Alliances Under Task Uncertainty: Unpacking Cooperation and Coordination Difficulties in Antibiotic Drug Development

Abstract: In this study we examine the effectiveness of innovation alliances under conditions of task uncertainty. Drawing from the organization design literature, we argue that task uncertainty increases coordination difficulties between alliance partners even when problems of cooperation owing to incentive, ownership and appropriation conflicts are not in evidence. We further suggest that co-development alliances requiring stronger task interdependence, and public-private alliances involving different organizational types, amplify the coordination difficulties under task uncertainty. Using global data on the drug development history of 2,976 antibacterial agents in the period 1995-2018, we find that the likelihood that a drug progresses from one development phase to the next is lower for drug development with alliances compared to solo efforts. Further, alliances between private sector partners outperform public-private alliances, and co-development alliances are less effective relative to more arm’s length arrangements. These findings draw attention to the understudied role of coordination in alliances, while highlighting the salience of task uncertainty distinct from behavioral or environmental uncertainty in innovation contexts.