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When companies decide upon a strategy to achieve and sustain
growth, they can choose between different options to reach this
goal. If external growth is chosen, alliances and acquisitions are
typically considered alternative governance structures that involve
cooperative efforts on the inter-organizational level. Despite this
similarity, each of the two governance types has its own strengths
and weaknesses: alliances are based on contracts and offer the firm
a substantial level of flexibility while acquisitions are
ownership-based and imply a higher degree of commitment but also
control. In the course of the governance decision, tradeoffs have
to be made between flexibility and control. The challenge managers
have to decide, which of the two governance modes suits a specific
situation best and will achieve superior results for the company.
Prior research shows that a company's history in
inter-organizational governance influences its future governance
choices. Firms that have cooperated in an alliance in the past make
different governance choices than firms who lack this experience.
In general, companies tend to choose governance modes they are
already familiar with for future transactions. In addition, whether
the partner firms know each other and have worked together before
also influences the choice between alliances and acquisitions. This
book lays its focus on situations, where companies have allied in
the past and are now deciding upon the appropriate governance form
for yet another cooperation. Situations where no alliance
experience exists and governance choices other than alliances and
acquisitions are not considered here. For academics as well as
practitioners, it is then of major interest to identify exactly how
knowing the target firm from past alliances affects the decision
between alliances and acquisitions. However, prior research on the
influence of partner-specific alliance experience on governance
choice yields mixed results. While it has been pr
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