IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

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

  • Habib, Michel A.
  • Mella-Barral, Pierre
Registered author(s):

    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.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.sciencedirect.com/science/article/pii/S0304406812000791
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

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

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

    as
    in new window

    Handle: RePEc:eee:mateco:v:49:y:2013:i:1:p:31-48
    Contact details of provider: Web page: http://www.elsevier.com/locate/jmateco

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Gomes-Casseres, Benjamin & Hagedoorn, John & Jaffe, Adam B., 2006. "Do alliances promote knowledge flows?," Journal of Financial Economics, Elsevier, vol. 80(1), pages 5-33, April.
    2. Boyan Jovanovic & Peter L. Rousseau, 2002. "The Q-Theory of Mergers," American Economic Review, American Economic Association, vol. 92(2), pages 198-204, May.
    3. Gerard Hoberg & Gordon Phillips, 2010. "Product Market Synergies and Competition in Mergers and Acquisitions: A Text-Based Analysis," Review of Financial Studies, Society for Financial Studies, vol. 23(10), pages 3773-3811, October.
    4. Bernardo, Antonio E. & Chowdhry, Bhagwan, 2002. "Resources, real options, and corporate strategy," Journal of Financial Economics, Elsevier, vol. 63(2), pages 211-234, February.
    5. Warusawitharana, Missaka, 2008. "Corporate asset purchases and sales: Theory and evidence," Journal of Financial Economics, Elsevier, vol. 87(2), pages 471-497, February.
    6. Darius Palia & S. Abraham Ravid & Natalia Reisel, 2008. "Choosing to Cofinance: Analysis of Project-Specific Alliances in the Movie Industry," Review of Financial Studies, Society for Financial Studies, vol. 21(2), pages 483-511, April.
    7. David T. Robinson, 2008. "Strategic Alliances and the Boundaries of the Firm," Review of Financial Studies, Society for Financial Studies, vol. 21(2), pages 649-681, April.
    8. Gary Gorton & Matthias Kahl & Richard J. Rosen, 2009. "Eat or Be Eaten: A Theory of Mergers and Firm Size," Journal of Finance, American Finance Association, vol. 64(3), pages 1291-1344, 06.
    9. Worawat Margsiri & Antonio S. Mello & Martin E. Ruckes, 2008. "A Dynamic Analysis of Growth via Acquisition," Review of Finance, European Finance Association, vol. 12(4), pages 635-671.
    10. Jianjun Miao & Dirk Hackbarth, 2011. "The dynamics of mergers and acquisitions in oligopolistic industries," Boston University - Department of Economics - Working Papers Series WP2011-029, Boston University - Department of Economics.
    11. Liu Yang, 2008. "The Real Determinants of Asset Sales," Journal of Finance, American Finance Association, vol. 63(5), pages 2231-2262, October.
    12. Lang, Larry H. P. & Stulz, ReneM. & Walkling, Ralph A., 1989. "Managerial performance, Tobin's Q, and the gains from successful tender offers," Journal of Financial Economics, Elsevier, vol. 24(1), pages 137-154, September.
    13. Andrew Atkeson & Patrick J. Kehoe, 2005. "Modeling and measuring organization capital," Staff Report 291, Federal Reserve Bank of Minneapolis.
    14. Paul R. Milgrom., 1987. "Employment Contracts, Influence Activities and Efficient Organization Design," Economics Working Papers 8741, University of California at Berkeley.
    15. Lambrecht, Bart M., 2004. "The timing and terms of mergers motivated by economies of scale," Journal of Financial Economics, Elsevier, vol. 72(1), pages 41-62, April.
    16. Matthew Rhodes-Kropf & David T. Robinson, 2008. "The Market for Mergers and the Boundaries of the Firm," Journal of Finance, American Finance Association, vol. 63(3), pages 1169-1211, 06.
    17. Michel A. Habib & Pierre Mella-Barral, 2007. "The Role of Knowhow Acquisition in the Formation and Duration of Joint Ventures," Review of Financial Studies, Society for Financial Studies, vol. 20(1), pages 189-233, January.
    18. Boyan Jovanovic & Peter L. Rousseau, 2001. "Vintage Organization Capital," NBER Working Papers 8166, National Bureau of Economic Research, Inc.
    19. Hart, Oliver D. & Moore, John, 1990. "Property Rights and the Nature of the Firm," Scholarly Articles 3448675, Harvard University Department of Economics.
    20. Margsiri, Worawat & Melloy, Antonio S. & Ruckesz, Martin E., 2008. "A Dynamic Analysis of Growth via Acquisition," CEI Working Paper Series 2008-8, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    21. Kaplan, Steven N & Weisbach, Michael S, 1992. " The Success of Acquisitions: Evidence from Divestitures," Journal of Finance, American Finance Association, vol. 47(1), pages 107-38, March.
    22. Vojislav Maksimovic & Gordon Phillips & Nagpurnanand Prabhala, 2011. "Post-Merger Restructuring and the Boundaries of the Firm," Working Papers 11-11, Center for Economic Studies, U.S. Census Bureau.
    23. Matthew Rhodes-Kropf & S. Viswanathan, 2004. "Market Valuation and Merger Waves," Journal of Finance, American Finance Association, vol. 59(6), pages 2685-2718, December.
    24. Rafael Rob & Peter Zemsky, . "Social Capital, Corporate Culture and Incentive Intensity," Penn CARESS Working Papers 7380c2f90d0b2f362ad71f139, Penn Economics Department.
    25. Shleifer, Andrei & Vishny, Robert W., 2003. "Stock market driven acquisitions," Journal of Financial Economics, Elsevier, vol. 70(3), pages 295-311, December.
    26. Vojislav Maksimovic, 2001. "The Market for Corporate Assets: Who Engages in Mergers and Asset Sales and Are There Efficiency Gains?," Journal of Finance, American Finance Association, vol. 56(6), pages 2019-2065, December.
    27. repec:ner:tilbur:urn:nbn:nl:ui:12-175778 is not listed on IDEAS
    28. Pisano, Gary P, 1989. "Using Equity Participation to Support Exchange: Evidence from the Biotechnology Industry," Journal of Law, Economics and Organization, Oxford University Press, vol. 5(1), pages 109-26, Spring.
    29. HEGE, Ulrich & HAUSWALD, Robert, 2002. "Ownership and control in joint ventures: theory and evidence," Les Cahiers de Recherche 750, HEC Paris.
    30. Grossman, Sanford J. & Hart, Oliver D., 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Scholarly Articles 3450060, Harvard University Department of Economics.
    31. Fulghieri, Paolo & Sevilir, Merih, 2009. "Organization and Financing of Innovation, and the Choice between Corporate and Independent Venture Capital," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 44(06), pages 1291-1321, December.
    32. Vojislav Maksimovic & Gordon Phillips, 2002. "Do Conglomerate Firms Allocate Resources Inefficiently Across Industries? Theory and Evidence," Journal of Finance, American Finance Association, vol. 57(2), pages 721-767, 04.
    33. Mathews, Richmond D., 2006. "Strategic alliances, equity stakes, and entry deterrence," Journal of Financial Economics, Elsevier, vol. 80(1), pages 35-79, April.
    34. Bart M. Lambrecht & Stewart C. Myers, 2007. "A Theory of Takeovers and Disinvestment," Journal of Finance, American Finance Association, vol. 62(2), pages 809-845, 04.
    35. Fluck, Zsuzsanna & Lynch, Anthony W, 1999. "Why Do Firms Merge and Then Divest? A Theory of Financial Synergy," The Journal of Business, University of Chicago Press, vol. 72(3), pages 319-46, July.
    36. Rosen, Sherwin, 1972. "Learning by Experience as Joint Production," The Quarterly Journal of Economics, MIT Press, vol. 86(3), pages 366-82, August.
    37. George P. Baker & Robert Gibbons & Kevin J. Murphy, 2008. "Strategic alliances: Bridges between "islands of conscious power"," NBER Chapters, in: Organizational Innovation and Firm Performance, pages 146-163 National Bureau of Economic Research, Inc.
    38. Morellec, Erwan & Zhdanov, Alexei, 2005. "The dynamics of mergers and acquisitions," Journal of Financial Economics, Elsevier, vol. 77(3), pages 649-672, September.
    39. Richmond D. Mathews & David T. Robinson, 2008. "Market Structure, Internal Capital Markets, and the Boundaries of the Firm," Journal of Finance, American Finance Association, vol. 63(6), pages 2703-2736, December.
    40. Paolo Fulghieri & Laurie Simon Hodrick, 2006. "Synergies and Internal Agency Conflicts: The Double-Edged Sword of Mergers," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(3), pages 549-576, 09.
    41. Prescott, Edward C & Visscher, Michael, 1980. "Organization Capital," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 446-61, June.
    42. Kogut, Bruce, 1989. "The Stability of Joint Ventures: Reciprocity and Competitive Rivalry," Journal of Industrial Economics, Wiley Blackwell, vol. 38(2), pages 183-98, December.
    43. 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.
    44. Hayne E. Leland, 2007. "Financial Synergies and the Optimal Scope of the Firm: Implications for Mergers, Spinoffs, and Structured Finance," Journal of Finance, American Finance Association, vol. 62(2), pages 765-807, 04.
    45. Servaes, Henri, 1991. " Tobin's Q and the Gains from Takeovers," Journal of Finance, American Finance Association, vol. 46(1), pages 409-19, March.
    46. Jeffrey W. Allen & Gordon M. Phillips, 2000. "Corporate Equity Ownership, Strategic Alliances, and Product Market Relationships," Journal of Finance, American Finance Association, vol. 55(6), pages 2791-2815, December.
    47. Balakrishnan, Srinivasan & Koza, Mitchell P., 1993. "Information asymmetry, adverse selection and joint-ventures : Theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 20(1), pages 99-117, January.
    48. Paul Gompers & Josh Lerner & David Scharfstein, 2005. "Entrepreneurial Spawning: Public Corporations and the Genesis of New Ventures, 1986 to 1999," Journal of Finance, American Finance Association, vol. 60(2), pages 577-614, 04.
    49. Joshua S. Gans & David H. Hsu & Scott Stern, 2000. "When Does Start-Up Innovation Spur the Gale of Creative Destruction?," NBER Working Papers 7851, National Bureau of Economic Research, Inc.
    50. Johnson, Shane A. & Houston, Mark B., 2000. "A Rexamination of the Motives and Gains in Joint Ventures," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 35(01), pages 67-85, March.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:eee:mateco:v:49:y:2013:i:1:p:31-48. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.