Monitoring partners Successful collaboration agreements typically have clear, yet flexible, monitoring and governance mechanisms. Not surprisingly, the more resources put at risk by the collaboration (for example, the greater the upfront investment or the more valuable the intellectual property contributed to the collaboration), the more governance structure partner firms are likely to impose on the relationship. There are three main types of governance mechanisms organizations use to manage their collaborative relationships: alliance contracts, equity ownership, and relational governance.
52 1)Alliance contracts are legally binding contractual arrangements to ensure that partners (a) are fully aware of their rights and obligations in the collaboration and (b) have legal remedies available if a partner should violate the agreement. Such contracts typically include: · What each partner is obligated to contribute to the collaboration, including money, services, equipment, intellectual property, and so on. · How much control each partner has in the arrangement. For example, the contract may stipulate whether partners have the right to admit new partners to the relation- ship or change the terms of the agreement. It may also stipulate the rights partners will have over any proprietary products or processes developed in the course of the collaboration. · When and how proceeds of the collaboration will be distributed. For example, the collaboration agreement may stipulate whether cash, intellectual property rights, or other assets will be distributed and the schedule of such distribution. Such contracts also often include mechanisms for monitoring each partner’s adherence to the agreement, such as through regular review and reporting requirements. Some collaboration agreements include provisions for periodic auditing either by the partner organizations or a third party. Many agreements also include provisions for terminating the relationship if the need for the alliance ends (for example, if the mission of the alliance is completed or the goals of the partner firms have changed) or partners encounter disputes they cannot resolve. Markets and strategies change over time, and effective collaboration agreements should be flexible enough to be adapted in the event of change and provide a graceful exit strategy for members that no longer wish to participate in the collaboration 2) Many alliances involve shared equity ownership, i.e., each partner contributes capital and owns a share of the equity in the alliance. Equity ownership helps to align the incentives of the partners (because the returns to their equity stake are a function of the success of the alliance), and provides a sense of ownership and commitment to the project that can facilitate supervision and monitoring of the alliance.