Alliance, Acquisition and Excludability

with Krishnamurthy Subramanian

Last Updated: Oct 2018

Abstract: This paper addresses the question whether alliance or acquisition is more efficient ownership structure when the assets are non-excludable. Non-excludability induces the possibility of ex-post competition, once two managers get access to each other’s assets. In sharp contrast to excludable assets, this ex-post competition makes strategic alliance more efficient than acquisition. This provides an explanation for why hi-tech acquisitions usually dampen innovation.