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Partial Ownership and Strategic Alliances with Reallocation of Corporate Resources

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  • Hiroshi Osano

Abstract

This paper considers the role of equity transfer to strategic alliance partners in mitigating the moral-hazard problem that occurs if a participating firm faces some possibility of reallocating a part of the resources devoted to the joint project of the strategic alliance or retreating from the strategic alliance before completing the joint project. I derive a situation in which equity transfer in the strategic alliance is a component of an optimal contract, in particular, in which equity transfer in the strategic alliance is superior to the contract with the cash transfer only. I also analyze optimal equity stake sizes.

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Bibliographic Info

Article provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.

Volume (Year): 167 (2011)
Issue (Month): 2 (June)
Pages: 202-223

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Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201106)167:2_202:poasaw_2.0.tx_2-z

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References

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  1. Patrick W. Schmitz, 2005. "Allocating Control in Agency Problems with Limited Liability and Sequential Hidden Actions," RAND Journal of Economics, The RAND Corporation, vol. 36(2), pages 318-336, Summer.
  2. Marco, MARINUCCI, 2008. "Optimal ownership in joint ventures with contributions of asymmetric partners," Discussion Papers (ECON - Département des Sciences Economiques) 2008016, Université catholique de Louvain, Département des Sciences Economiques.
  3. Osano, Hiroshi, 1996. "Intercorporate shareholdings and corporate control in the Japanese firm," Journal of Banking & Finance, Elsevier, vol. 20(6), pages 1047-1068, July.
  4. Georg Noeldeke & Klaus Schmidt, 1998. "Sequential Investments and Options to Own," RAND Journal of Economics, The RAND Corporation, vol. 29(4), pages 633-653, Winter.
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Cited by:
  1. Luciano Fanti, 2011. "Cross-ownership and unions in a Cournot duopoly: when profits reduce with horizontal product differentiation," Discussion Papers 2011/128, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  2. Fanti, Luciano, 2013. "Cross-ownership and unions in a Cournot duopoly: When profits reduce with horizontal product differentiation," Japan and the World Economy, Elsevier, vol. 27(C), pages 34-40.
  3. Luciano Fanti, 2011. "Product differentiation and duopoly: when social welfare benefits from cross-shareholding," Discussion Papers 2011/129, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.

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