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Skills, core capabilities, and the choice between merging, allying, and trading assets


Habib, Michel; Mella-Barral, Pierre (2013). Skills, core capabilities, and the choice between merging, allying, and trading assets. Journal of Mathematical Economics, 49(1):31-48.

Abstract

We analyze two firms’ choice between merging, allying, and trading assets. We consider a setting in which firms have assets, skills, and core capabilities; skills are the component of organizational capital that increases in the course of joint operations, core capabilities the component that does not. We find that the two firms trade assets for them to operate separately in case the two firms have high initial skills; the two firms merge in case they have similar core capabilities; they ally where there is little equilibrium double moral hazard. We compare the times to dissolution in the alliance with those to divesture or post-merger integration in the merger; for all but the last jointly operated asset, we find that joint operations cease earlier in the alliance than in the merger.

Abstract

We analyze two firms’ choice between merging, allying, and trading assets. We consider a setting in which firms have assets, skills, and core capabilities; skills are the component of organizational capital that increases in the course of joint operations, core capabilities the component that does not. We find that the two firms trade assets for them to operate separately in case the two firms have high initial skills; the two firms merge in case they have similar core capabilities; they ally where there is little equilibrium double moral hazard. We compare the times to dissolution in the alliance with those to divesture or post-merger integration in the merger; for all but the last jointly operated asset, we find that joint operations cease earlier in the alliance than in the merger.

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3 citations in Scopus®
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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Language:English
Date:2013
Deposited On:01 Nov 2012 10:00
Last Modified:05 Apr 2016 16:03
Publisher:Elsevier
ISSN:0304-4068
Publisher DOI:https://doi.org/10.1016/j.jmateco.2012.09.006
Official URL:http://www.sciencedirect.com/science/article/pii/S0304406812000791
Other Identification Number:merlin-id:7383

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