Partial Ownership and Strategic Alliances with Reallocation of Corporate Resources

Hiroshi Osano

Journal of Institutional and Theoretical Economics (JITE), 2011, vol. 167, issue 2, 202-223

Abstract: This paper considers the role of equity transfer to strategic alliance partners in mitigating the moral-hazard problem that occurs if a participating firm faces some possibility of reallocating a part of the resources devoted to the joint project of the strategic alliance or retreating from the strategic alliance before completing the joint project. I derive a situation in which equity transfer in the strategic alliance is a component of an optimal contract, in particular, in which equity transfer in the strategic alliance is superior to the contract with the cash transfer only. I also analyze optimal equity stake sizes.

JEL-codes: D82 D86 G32 G34 L14 L24 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (5)

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