Strategic alliances are long-term contracts between legally distinct organizations that provide for sharing the costs and benefits of a mutually beneficial activity. In this paper, I develop and test a model that helps explain why firms sometimes prefer alliances over internally organized projects. I introduce managerial effort into a model of internal capital markets and show how strategic alliances help overcome incentive problems that arise when headquarters cannot pre-commit to particular capital allocations. The model generates a number of implications, which I test using a large sample of alliance transactions in conjunction with Compustat data. , Oxford University Press.
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Article provided by Oxford University Press for Society for Financial Studies in its journal Review of Financial Studies.
Volume (Year): 21 (2008) Issue (Month): 2 (April) Pages: 649-681 Download reference. The following formats are available: HTML
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