The bargaining effect of startup founders and venture capitalists on value-capturing rights

In this paper, we investigate the proportion of value-capturing rights obtained by startups in cooperative commercialization agreements. We apply the bargaining framework for surplus division and develop hypotheses about the effect of startups’ founders and venture backing (VCs) on startups’ value appropriation within cooperative commercialization agreements with incumbent partners. Specifically, we suggest that signals and networks that originate from a startup’s organizational affiliates can provide a superior bargaining position to startups and enhance their ability to capture a greater share of value derived from cooperative commercialization. In particular, we suggest that signals emanating from the superior credentials of founders and prominent VC affiliations as well as previously established network connections of founders and VCs with a number of incumbent partners impart bargaining advantage for startups and derive superior share of value- capturing rights for them. Empirical analyses of 182 contract agreements of startups in the biopharmaceutical industry furnish evidence for our theory