Ownership and Control Rights in Internet Portal Alliances, 1995-1999

Daniel W Elfenbein and Josh Lerner

RAND Journal of Economics, 2003, vol. 34, issue 2, 356-69

Abstract: We examine the structure of more than 100 alliances by Internet portals and other firms between 1995 to 1999 from a contract-theory perspective. Models of incomplete contracts frequently invoke unforeseen contingencies, the cost of writing contracts, and the cost of enforcing contracts in justifying the assumption of incompleteness. The setting in which Internet portals formed alliances was rife with these sorts of transaction costs. We argue that these alliances can be viewed as incomplete contracts and find that the division of ownership and the allocation of control rights are consistent with the incomplete-contracting literature. Copyright 2003 by the RAND Corporation.

Date: 2003
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