Alliance mode in inter-firm cooperation: A real option view

Abstract

This paper intends to explain and predict the alliance mode in inter-firm cooperation from the real option view. In the past, this issue has been explored from organization economics perspective, especially by drawing on transaction cost theory. However, it is suggest that real option view can be a useful theory in distinguishing between market-based alliance and equity-based alliance. This attempt also expands the real option literature in alliance because in the past, the choice between market vs hierarchy has been the main focus of research. Specifically, it is proposed that two factors – the level of perceived uncertainty and the perceived value of underlying real asset – influence the choice between market-based vs. equity-based alliances.