Strategic Alliances and the Boundaries of the Firm
Open Access
- 5 January 2008
- journal article
- research article
- Published by Oxford University Press (OUP) in The Review of Financial Studies
- Vol. 21 (2) , 649-681
Abstract
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.Keywords
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