CAN ALLIANCES SUBSTITUTE ACQUISITIONS? THE EVIDENCE FROM A QUASI-EXPERIMENT

We utilize a quasi-experimental setting that exogenously changes costs to acquire the targeted firm to examine the relationship between costs to acquire the target and alliance decisions. We find that firms with increased acquisition costs, due to the increased takeover protection, tend to experience alliances more than their comparison group. Furthermore, we examine boundary conditions for this relationship-intra-industry transaction and resource redeployability. Our analyses also reveal that, when the costs of acquisition increase, 1) equity alliances are more likely to be adopted as a substitute; 2) acquisitions become less likely; 3) alliance performance decreases; and 4) acquisition premiums increase.