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Skills, core capabilities, and the choice between merging, allying, and trading assets

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  • Habib, Michel A.
  • Mella-Barral, Pierre
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    Abstract

    We analyze two firms’ choice between merging, allying, and trading assets. We consider a setting in which firms have assets, skills, and core capabilities; skills are the component of organizational capital that increases in the course of joint operations, core capabilities the component that does not. We find that the two firms trade assets for them to operate separately in case the two firms have high initial skills; the two firms merge in case they have similar core capabilities; they ally where there is little equilibrium double moral hazard. We compare the times to dissolution in the alliance with those to divesture or post-merger integration in the merger; for all but the last jointly operated asset, we find that joint operations cease earlier in the alliance than in the merger.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Mathematical Economics.

    Volume (Year): 49 (2013)
    Issue (Month): 1 ()
    Pages: 31-48

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    Handle: RePEc:eee:mateco:v:49:y:2013:i:1:p:31-48

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    Web page: http://www.elsevier.com/locate/jmateco

    Related research

    Keywords: Mergers; Alliances; Asset trades; Skills; Core capabilities; Organizational capital; Dissolution; Divesture; Post-merger integration;

    References

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    Cited by:
    1. Beshears, John, 2013. "The performance of corporate alliances: Evidence from oil and gas drilling in the Gulf of Mexico," Journal of Financial Economics, Elsevier, vol. 110(2), pages 324-346.

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