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Decision Making in Strategic Alliances: An Experimental Investigation

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  • Agarwal, Rajshree

    (U of Illinois at Urbana-Champaign)

  • Croson, Rachel

    (U of Pennsylvania)

  • Mahoney, Joseph T.

    (U of Illinois at Urbana-Champaign)

Abstract

This paper experimentally investigates the determinants of the deviation between potential and realized value creation in strategic alliances. To better understand how decision making in alliances may influence success, we use an experimental design that juxtaposes two important factors that affect alliance members' decisions: economic incentives and communication. The evidence derived from our experimental design sheds light on the relative impact of each, and importantly, how both factors interact to explain the probability of successful outcomes in an alliance. These empirical results are robust to the use of undergraduates, MBAs and seasoned executives who averaged over 20 years of work experience.

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Bibliographic Info

Paper provided by University of Illinois at Urbana-Champaign, College of Business in its series Working Papers with number 07-0108.

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Date of creation: 2007
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Handle: RePEc:ecl:illbus:07-0108

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Web page: http://www.business.uiuc.edu/Working_Papers/Main.asp
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  1. Oxley, Joanne E, 1997. "Appropriability Hazards and Governance in Strategic Alliances: A Transaction Cost Approach," Journal of Law, Economics and Organization, Oxford University Press, vol. 13(2), pages 387-409, October.
  2. Plott, Charles R, 1982. "Industrial Organization Theory and Experimental Economics," Journal of Economic Literature, American Economic Association, vol. 20(4), pages 1485-1527, December.
  3. W. Coles, Jerilyn & Hesterly, William S., 1998. "The impact of firm-specific assets and the interaction of uncertainty: an examination of make or buy decisions in public and private hospitals," Journal of Economic Behavior & Organization, Elsevier, vol. 36(3), pages 383-409, August.
  4. Su, Han Chan & Kensinger, John W. & Keown, Arthur J. & Martin, John D., 1997. "Do strategic alliances create value?," Journal of Financial Economics, Elsevier, vol. 46(2), pages 199-221, November.
  5. Simon, Herbert A, 1978. "Rationality as Process and as Product of Thought," American Economic Review, American Economic Association, vol. 68(2), pages 1-16, May.
  6. Oxley, Joanne E., 1999. "Institutional environment and the mechanisms of governance: the impact of intellectual property protection on the structure of inter-firm alliances," Journal of Economic Behavior & Organization, Elsevier, vol. 38(3), pages 283-309, March.
  7. Jongwook Kim & Joseph T. Mahoney, 2002. "Resource-based and property rights perspectives on value creation: the case of oil field unitization," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 23(4-5), pages 225-245.
  8. Argyres, Nicholas S. & Liebeskind, Julia Porter, 1998. "Privatizing the intellectual commons: Universities and the commercialization of biotechnology," Journal of Economic Behavior & Organization, Elsevier, vol. 35(4), pages 427-454, May.
  9. Hazlett, Denise, 1997. "A Common Property Experiment with a Renewable Resource," Economic Inquiry, Western Economic Association International, vol. 35(4), pages 858-61, October.
  10. Jongwook Kim & Joseph T. Mahoney, 2005. "Property rights theory, transaction costs theory, and agency theory: an organizational economics approach to strategic management," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 223-242.
  11. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1990. "Experimental Tests of the Endowment Effect and the Coase Theorem," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1325-48, December.
  12. Poppe, Matthijs & Utens, Lisbeth, 1986. "Effects of greed and fear of being gypped in a social dilemma situation with changing pool size," Journal of Economic Psychology, Elsevier, vol. 7(1), pages 61-73, March.
  13. Erin Anderson, 1985. "The Salesperson as Outside Agent or Employee: A Transaction Cost Analysis," Marketing Science, INFORMS, vol. 4(3), pages 234-254.
  14. Rachel Croson & Karen Donohue, 2006. "Behavioral Causes of the Bullwhip Effect and the Observed Value of Inventory Information," Management Science, INFORMS, vol. 52(3), pages 323-336, March.
  15. Smith, Vernon L, 1976. "Experimental Economics: Induced Value Theory," American Economic Review, American Economic Association, vol. 66(2), pages 274-79, May.
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