Strategic alliance, agency problems, and labor investment efficiency

Wenrui Chen, Zhiwu Chen, Ling Qin, Yaowen Shan and Weihang Xu

Economic Modelling, 2024, vol. 139, issue C

Abstract: Inter-firm strategic alliances, which are formed to facilitate resource allocation and improve efficiency, may also inadvertently lead to labor investment inefficiencies due to increased agency conflicts and managerial opportunism. Using a sample of Chinese firms, we find that strategic alliances significantly reduce labor investment efficiency by 4.5%. The reduction in labor investment efficiency takes the form of reduced revenue-generating capacity per unit of labor, overhiring of labor, and increased labor cost stickiness. Consistent with the agency view, we find that the negative effects of strategic alliances are more pronounced under weak corporate governance and high information asymmetry among alliance partners. Overall, the results highlight the complex dynamics of inter-firm strategic alliances and provide practical insights for improving labor investment efficiency in the context of inter-firm cooperation.

Keywords: Strategic alliances; Labor investment efficiency; Agency problems; Informed decision making (search for similar items in EconPapers)
JEL-codes: D22 G39 M41 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:139:y:2024:i:c:s0264999324001652

DOI: 10.1016/j.econmod.2024.106809

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