The architecture of cooperation: Managing coordination costs and appropriation concerns in strategic alliances

Abstract

This study examines why firms choose different governance structures across their alliances. We focus on the coordination costs in alliances that arise from interdependence of tasks across organizational boundaries and the related complexity of ongoing activities to be completed jointly or individually. We use a typology of alliance governance structures that differentiates structures by the magnitude of hierarchical controls to test hypotheses predicting alternative contractual choices. We use empirical data on alliance announcements in three worldwide industries over a 20-year period to assess which factors explain the choice of alliance types. The findings suggest that the magnitude of hierarchical controls in contractual relationships such as alliances is influenced by the anticipated coordination costs and by expected appropriation concerns.•.