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Strategic alliances: Bridges between “islands of conscious power”

In: Organizational Innovation and Firm Performance

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  • George P. Baker
  • Robert Gibbons
  • Kevin J. Murphy

Abstract

Strategic alliances range from unstructured collaborations, through consortia and joint ventures that superimpose new governance structures on existing firms, to transactions that restructure firm boundaries and asset ownership. In this paper, we draw on detailed discussions with practitioners to describe and analyze a rich collection of feasible governance structures. Our model focuses on two issues emphasized by practitioners: spillover effects (as opposed to hold-ups motivated by specific investments) and contracting problems ex post (as opposed to only ex ante). By considering the allocation of assets, decision rights, and payoffs, we generate a large number of potential governance structures, including strategic divestitures, total divestitures, licensing agreements, and royalty agreements. For the broad range of parameter values and payoff functions we consider, we show that each of these possible strategic alliances could be optimal. We expect that, given institutional knowledge about a particular setting, our broad theoretical framework can be specialized to deliver testable predictions for that setting (as has occurred in some analogous work on vertical integration, for example). J. Japanese Int. Economies 22 (2) (2008) 146-163.

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This chapter was published in:

  • George Baker & Takeo Hoshi & Hideshi Itoh & Sadao Nagaoka, 2008. "Organizational Innovation and Firm Performance," NBER Books, National Bureau of Economic Research, Inc, number bake08-1, October.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 12171.

    Handle: RePEc:nbr:nberch:12171

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    References

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    Cited by:
    1. Michael D. Ryall & Rachelle C. Sampson, 2009. "Formal Contracts in the Presence of Relational Enforcement Mechanisms: Evidence from Technology Development Projects," Management Science, INFORMS, INFORMS, vol. 55(6), pages 906-925, June.
    2. Konovalov, Alexander, 2014. "Competition and Cooperation in Network Games," Working Papers in Economics, University of Gothenburg, Department of Economics 583, University of Gothenburg, Department of Economics.
    3. Michael Koenig & Claudio Tessone & Yves Zenou, 2012. "Nestedness in Networks: A Theoretical Model and Some Applications," Discussion Papers, Stanford Institute for Economic Policy Research 11-003, Stanford Institute for Economic Policy Research.
    4. Robert Gibbons, Editor & John Roberts, Editor, 2012. "The Handbook of Organizational Economics," Economics Books, Princeton University Press, Princeton University Press, edition 1, volume 1, number 9889.
    5. Desrieux, Claudine & Chong, Eshien & Saussier, Stéphane, 2013. "Putting all one's eggs in one basket: Relational contracts and the management of local public services," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 89(C), pages 167-186.
    6. Habib, Michel A. & Mella-Barral, Pierre, 2013. "Skills, core capabilities, and the choice between merging, allying, and trading assets," Journal of Mathematical Economics, Elsevier, vol. 49(1), pages 31-48.
    7. Panico, Claudio, 2011. "On the contractual governance of research collaborations: Allocating control and intellectual property rights in the shadow of potential termination," Research Policy, Elsevier, Elsevier, vol. 40(10), pages 1403-1411.
    8. Joanna Tyrowicz, 2007. "Blame No One ?Investment Decisions of the Polish Stock-Listed Companies," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, ULB -- Universite Libre de Bruxelles, vol. 50(4), pages 391-410.
    9. Stéphane Saussier & Carine Staropoli & Anne Yvrande-Billon, 2009. "Public–Private Agreements, Institutions, and Competition: When Economic Theory Meets Facts," Review of Industrial Organization, Springer, Springer, vol. 35(1), pages 1-18, September.
    10. Jell-Ojobor, Maria & Windsperger, Josef, 2014. "The Choice of Governance Modes of International Franchise Firms — Development of an Integrative Model," Journal of International Management, Elsevier, Elsevier, vol. 20(2), pages 153-187.
    11. Michael Klien, 2014. "Corporatization and the Behavior of Public Firms: How Shifting Control Rights Affects Political Interference in Water Prices," Review of Industrial Organization, Springer, Springer, vol. 44(4), pages 393-422, June.
    12. Beshears, John, 2013. "The performance of corporate alliances: Evidence from oil and gas drilling in the Gulf of Mexico," Journal of Financial Economics, Elsevier, Elsevier, vol. 110(2), pages 324-346.
    13. Giorgio Zanarone, 2012. "Coase (1937) revisited: Endogenous fiat in firms and markets," International Review of Economics, Springer, Springer, vol. 59(2), pages 201-221, July.
    14. J. Windsperger, 2009. "Allocation of decision rights in joint ventures," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(8), pages 491-501.

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