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Strategic alliances: Bridges between "islands of conscious power"

In: Organizational Innovation and Firm Performance

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

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, May.
  • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 12171.
    Handle: RePEc:nbr:nberch:12171
    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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