EXPRESS: To Acquire or to Ally? the Impact of Strategic Emphasis on Governance Mode Choice

In pursuit of growth, firms often rely on outside options and choose a specific governance mode (acquisitions or alliances) to manage their external partnerships. In such pursuits, a firm’s strategic emphasis, i.e., relative focus on value appropriation vs. value creation, could be crucial in determining appropriate governance mode choice. In this paper, the authors draw on transaction cost economics and the resource-based view to articulate and empirically assess the impact of strategic emphasis on governance mode choice using a large panel of publicly listed US firms. They also identify and test two boundary conditions, namely CMO presence and analyst coverage of the firm. The results indicate that firms with a greater strategic emphasis on value appropriation relative to value creation are more likely to prefer acquisitions over alliances. Further, the positive impact of strategic emphasis on the likelihood of choosing acquisitions over alliances is weakened both with CMO presence and with increasing analyst coverage of the firm. These results provide insights on how a firm’s strategic emphasis might impact its choice of governance mode, in the presence of CMO and analyst coverage.