Abstract: This research explores the relationship between incumbent pharmaceutical firms and biotechnology startups. Skilled incumbents are more likely to bring a drug to market, market the drug well, etc., and add value to the startup and increase its chance of a successful exit (IPO or M&A event). But skilled incumbents are also likely better at sourcing and aligning with startups already destined for success. These effects are referred to as as adding value and sorting, respectively. Given the basic structure of this industry, to what extent are incumbents adding value to their startup partners and increasing their likelihood of a successful exit event, and to what extent are they skilled in sorting into matches with successful startups with commercially viable technology? What are the observable determinants of the level of sorting and of value adding? This study considers complementary assets, like access to capital, technological category, and geography, and examines if there is persistence in the heterogeneity of incumbent impact. To do this, the study sets up and estimates a two-sided matching model from Sorensen (2007) using biotechnology alliance data from 1973 to 2009.