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Strategic Alliances and the Boundaries of the Firm

Strategic Alliances and the Boundaries of the Firm 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Review of Financial Studies Oxford University Press

Strategic Alliances and the Boundaries of the Firm

The Review of Financial Studies , Volume 21 (2) – Apr 5, 2008

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Publisher
Oxford University Press
Copyright
© The Author 2008. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org
Subject
Articles
ISSN
0893-9454
eISSN
1465-7368
DOI
10.1093/rfs/hhm084
Publisher site
See Article on Publisher Site

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.

Journal

The Review of Financial StudiesOxford University Press

Published: Apr 5, 2008

Keywords: JEL Classification G32 D21 D23

There are no references for this article.