This study investigates a prevalent assumption or argument that synergy between businesses in a multi-business firm acts as a barrier for exiting that firm’s business. Using a formal model, the study situates synergy in the context where the firm can exit its business through resource redeployment or through divestiture. The model identifies six conditions, in terms of the type of synergy and of the determinants of resource redeployment and divestiture, with which synergy can actually increase, rather than decrease, the odds of business exit. Knowledge of these conditions may be useful in future empirical research on business exit and can stimulate better exit decisions by executives. The results are also instrumental for more balanced perspectives of synergy than the view that has developed since the field’s formation.

Abstract Research Summary Is real option theory useful for management research? This topic was hotly debated two decades ago. Real options were said to be inapplicable to management research and to lack conceptual distinctiveness. Whereas responses to the claim about the non‐distinctiveness of real options were disparate, the concern about the theory's non‐applicability was considered remediable. Such responses left the impression that real options lost the debate, and the use of real options in management research started to stagnate. This paper reviews the opposing positions in the debate, establishes the conceptual distinctiveness of real options, and outlines responses to concerns about the theory's applicability to management research, thereby underscoring the promise of real option theory as a key pillar for research in strategic management. Managerial Summary Managers often face decisions about whether to invest, wait, expand, switch the use of resources, or exit a market under uncertainty. This paper explains why real options remain a valuable way to think about such decisions despite earlier criticism of the approach. It argues that the core strength of real options is not only in valuing investments but also in helping managers make better sequences of decisions over time by considering how today's choices affect tomorrow's opportunities. The paper also shows how real options can accommodate learning, changing information, organizational constraints, and behavioral biases rather than ignoring them. By viewing strategy as a dynamic process of optimizing decisions under uncertainty, managers can better preserve flexibility, allocate resources, and improve long‐term value creation in changing environments.

Research relying on media richness theory has explored the communication media used by individuals who perform collaborative tasks that involve equivocality, a situation characterized by ambiguous information with multiple interpretations. This research implicitly assumes that individuals have common goals and priorities for collaborating, and so they can expect to encounter only cooperative behavior by the other party. We extend the core ideas of media richness theory to an interfirm collaboration context characterized by mixed motives where individuals can expect to encounter either cooperative or competitive behavior depending on their partners’ motives for the collaboration. In particular, we examine the communication media used during the interactions between alliance managers who are working for different firms with potentially different strategic goals and priorities. We argue that in certain types of alliances, equivocality can affect how partners perceive each other’s motives for the collaboration by leading to two types of errors: unnecessary misinterpretation and suspicion that the other party has hidden motives for the collaboration when in fact they do not (i.e., type I errors) and failing to identify that the other party has hidden motives when they actually do (i.e., type II errors). While unnecessary suspicions can be avoided by using media with higher richness in general, only certain types of richer media can help identify hidden motives. Our findings indicate that alliance managers are not more likely to use richer media for more equivocal tasks on an overall basis, but they are more likely to do so only in certain types of collaborations in which such errors are more likely to arise, and only for certain types of richer media that can help address either type of error (i.e., type I or type II error). We discuss the implications of these findings for research on communication media grounded in media richness theory and research on alliance governance.

This study moves beyond the traditional atomistic view of firms engaged in alliance agreements. By integrating current research on internal organizational design with research on interfirm collaboration, we investigate the implications of the organizational design of parent firms for the design and governance of technology partnerships. More specifically, we propose that in a research and development (R&D) alliance between a client firm and an R&D firm, the client firm’s internal organizational structure in R&D plays an important role in alliance design and governance. Centralized firms are better able to integrate knowledge in the organization compared with decentralized firms, and hence, we theorize that they will design their technology partnerships for greater knowledge access. Empirical findings from alliances in the biopharmaceutical industry offer support for our predictions: firms with centralized R&D decision making are more likely to capture intellectual property rights. Further, these firms tend to engage in alliances with broader vertical and horizontal scope and greater technological interdependence in order to access, recombine, and distribute knowledge. This study extends research on alliance design and governance by underscoring the important influence of a partner firm’s organizational structure.

Research Summary Upfront payments are important financial resources startups seek to negotiate in technology alliances. This study unpacks how venture-backed startups can benefit from their VC affiliations and obtain better payments. We develop a bargaining framework and argue that VCs can strengthen venture-backed startups' hand in alliance negotiations through two distinct pathways: (i) by providing a quality signal, and (ii) by serving as conduits of alternative partnering options. We further suggest that these distinct benefits in bargaining hinge on startups' technological quality, which substitutes for the quality signal arising from VC affiliations but complements the VC's intermediation role in markets for partners. The evidence therefore identifies the distinct and complex channels by which VCs can help startups obtain financial resources at nascent stages through their technology alliances.Managerial Summary Upfront payments in technology alliances are vital revenues for technology startups. This study reveals how venture capital (VC) affiliations strengthen startups' bargaining position and enable them to secure larger payments. VCs add value in startups' alliance negotiations in two key ways: by signaling the quality of the startup's resources and by providing alternative partnering options. The benefits of these mechanisms vary with the startup's technological quality-strong technology can substitute for the VC's quality signal but enhances the value of VC intermediation. Managers should recognize that VCs add value to their ventures beyond financing by also reinforcing their investee startups' bargaining power, helping startups negotiate favorable terms in technology alliances.

Multinational corporations expand foreign subsidiaries by switching resources from other locations or by scaling up these subsidiaries independently. Although the two options are alternatives, the choice between them and their interactions with each other have not been investigated. This study develops a model that casts these options as alternatives and provides several novel insights. These results help explain paradoxical findings in international strategy research and motivate future empirical studies on the means by which firms expand their foreign subsidiaries.

Are real options useful for management research? Twenty years ago, this topic was hotly debated in the Academy Management Review. The major charge to real options was that the theory, in its existing state, was limitedly applicable to management research. What appeared to be only a minor, accompanying caveat was that the theory lacked conceptual uniqueness. Whereas responses of the advocates of real options to the latter caveat were disparate, the limitations posed in the former charge were deemed naturally remediable and, thus, not limiting the use of real options. Such responses left a strong impression that real options lost the debate. Following that outcome, the use of real options in management research started to stagnate. This study carefully reviews positions of the two opposing parties in the debate, establishes the conceptual uniqueness of real options, and outlines solutions to the charges to the applicability of real options to management research.

We examine the linkages between firms' M&A activity and the information exchange between executives and analysts during quarterly earnings calls. Prior M&A research has mostly focused on the considerations presented by information asymmetry between buyers and sellers themselves in M&A. However, these concerns also exist between the buying firm's executives and capital markets. We examine whether firms' M&A activity results in an information exchange between executives and analysts that highlights corporate strategy as a discussion topic. Thus, we test whether there is consistency between firms' corporate growth agendas and the information released to the public by these firms. This question is relevant, as disclosure is central to firms' ability to raise capital and compete. We also investigate the degree to which these information exchanges affect analysts' earnings forecast errors.

This essay re-examines the literature on the governance of interorganizational relationships, focusing on the insights of alliance research using transaction cost economics. Despite substantial progress, challenges arise because research has not devoted attention to some mechanisms of governance (i.e., administrative controls and supporting legal institutions) compared with others (i.e., incentives). Parties can develop bespoke collaborative agreements that mix and match various mechanisms of governance along these dimensions, rather than accessing a typical bundle commonly associated with a discrete organizational form. This conclusion challenges the iconic governance continuum and surfaces new methodological opportunities for this research stream. The essay also challenges what we think we know by identifying a variety of omitted variable problems that often crop up in governance research (e.g., focusing on the cooperative context of collaboration while not attending to the competitive context, excluding critical administrative structures when studying the interplay between contracts and trust, assuming transactional attributes are exogenous rather than endogenous to a search process, failing to account for shifting institutional supports for collaboration, etc.). By clarifying what we know and do not know about alliance governance, the essay identifies some pathways for developing more reliable, cumulative knowledge on interorganizational relationships.

Steering committees are pivotal for governing complex collaborations by consensus to facilitate coordination and knowledge sharing. Although consensus-based governance promotes mutuality, it can also cause deadlocks, stalling expeditious decision making. We examine the conditions under which alliance partners delegate decision making authority to steering committees as well as the conditions under which authority over discordant matters can be relocated to one of the alliance partners. We argue that joint coordination concerns increase the likelihood of authority delegation, whereas the higher costs and stakes associated with decision stalemates provide grounds for authority reversion. Empirical analyses of strategic alliances in the biopharmaceutical industry support our arguments. Our paper demonstrates the versatility of contractually defined administrative interfaces in alliance governance, allowing partners to coordinate bilaterally and adapt hierarchically as and when required.

Material adverse change (MAC) clauses and contingent earnouts are important contractual mechanisms used to protect acquirers from the risk of adverse selection. Yet, the extant literature has not sufficiently explored the antecedents of their use, in particular within the context of technology acquisitions. In this study, we take advantage of the passage of the American Inventors Protection Act (AIPA), which disseminated information through the publication of patent applications, to explore the impact of innovation disclosures on the design of technology acquisition contracts. Consistent with the view that an increase in the availability of information related to the broader technological landscape reduces the need for contractual protections in acquisition contracts, our analysis demonstrates that deals disproportionately affected by AIPA have less expansive MAC clauses and are less likely to feature contingent earnouts. These results provide new evidence linking the use of MAC clauses and earnouts with acquisitions subject to information frictions.

The presence of independent directors on corporate boards is often seen as an important means of monitoring to address principal -agent problems and of providing external resources and advice to management. In joint ventures (JVs), however, shareholdermanagement frictions can be lessened by appointing insiders to management and board positions, whereas access to valuable expertise, resources, and networks are provided by the partners themselves. A natural question, then, is why and when do partners appoint independent directors to JV boards? We argue that the appointment of independent directors to joint venture boards is primarily driven by principal -principal conflict considerations, which are unique in the joint venture context compared with conventional widely held corporations. Consistent with this argument, we find that the likelihood of appointing independent directors increases when JVs face more exchange hazards due to the competitive overlap between partners and the broader functional scope of the JV. However, given that JVs also have alternative governance mechanisms to mitigate shareholder conflicts, we also find that more complex contractual agreements can potentially substitute for independent directors on JV boards. Although relational governance is often highlighted as a key facet of JV governance, we do not find such a substitution effect for this supporting governance mechanism. Overall, our research therefore highlights several interesting domain translation issues when applying existing corporate governance insights to the joint venture setting. Our paper concludes with a call for future research on independent directors serving on JV boards, as JVs represent an organizational form that has been neglected in corporate governance research.

This study focuses on the role of intrinsic speed capabilities, which refer to the ability to execute investment projects faster than competitors, in the attractiveness and selection of alliance partners. We predict that intrinsically faster firms have a higher likelihood of being selected as alliance partners due to the potential of accelerating the realization of future revenue streams of an alliance project as well as of preempting slower competitors. We also expect that intrinsic speed capabilities substitute for deficiencies in alliance experience and firm innovativeness. Using data on construction projects in the global Liquefied Natural Gas industry, we find empirical support for our theoretical expectations. Our results suggest that firm speed plays an important role in alliance partner selection and has the potential to facilitate the generation of future growth options for firms due to greater partner attractiveness in the market for alliance partners.

In this paper, we study the relationship between family ownership and corporate alliance intensity. Theoretically, we propose that the tendency of family firms to pursue socioemotional wealth objectives exacerbates the level of information asymmetry they display vis‐à‐vis other firms, reducing their attractiveness as alliance partners. Based on a panel of US firms, we find that family firms join fewer alliances than non‐family firms. In line with our arguments, we also find that analyst and media coverage, and the presence of dedicated institutional investors mitigate the negative relationship between family ownership and alliance intensity. By highlighting the role of family ownership in alliances, we provide new insights into the debate on the ability of family firms to develop. Moreover, we contribute to research on the antecedents of alliances by introducing the role of owners’ attributes and identifying a set of mechanisms that mitigate the informational hazards that family firms present to prospective partners.

Notwithstanding their popularity, veto rights are inadequately understood features of international agreements, particularly interfirm exchanges such as international joint ventures (IJVs). As an interesting feature of an IJV’s governance design, they shape decision-making of the most powerful administrative mechanism of an IJV – the IJV board. IJVs’ boards play a crucial part in supporting adaptation to contingencies, but their adaptive capacity can also give rise to a different set of concerns, however: their opportunistic use by a partner in control of the board. Such behavior, we argue, can be reined in by veto rights. Building on transaction cost economics, we posit that goal conflicts owing to partner competition and environmental uncertainty contribute to the allocation of veto rights to partners. Concerns surrounding the maladaptive use of board control weaken when institutional safeguards are strong, reducing the need for veto rights. Findings from a survey of IJVs furnish evidence in support of the core proposition that veto rights can help parent firms address maladaptation. We conclude that veto rights can be an important element of partners’ arsenal when designing and governing IJVs based on comparative efficiency considerations.

Empirical evidence shows that firms engaging in alliance re-evaluation are able to increase their alliances' performance. However, extant literature largely treats alliance re-evaluation as a 'black box'. In this paper, we develop a conceptual model of alliance re-evaluation to gain better insight on this important phase of the alliance lifecycle. Further, in a decision experiment, we study alliance managers' heuristics applied to the decision of whether to pursue an outside partnering opportunity during the course of an alliance re-evaluation. Our results show that in their decision heuristics alliance managers rate value creation-related partner characteristics more highly than commitment-related partner characteristics. However, the importance of commitment-related characteristics is contingent on the level and dimension of uncertainty present in the managers' environment. Thus, our findings call for a more nuanced perspective on environmental uncertainty in alliance re-evaluation decision making. Implications for research on alliances and managerial heuristics are discussed.