Integration of a Value Chain on Choice of Alliance or Acquisition: An Empirical Study of the Fast-Moving Consumer Goods Industry

For firms seeking to strategically combine their resources with those of other firms, two popular alternative governance structures emerge: alliance or acquisition. In this chapter, we use an integrated value chain to examine the how and why configurations of two firms' resources and knowledge affect the costs and benefits associated with each governance structure. It is assumed that the integrated value chain and market growth are factors that will affect the likelihood of the focal pair of firms forming an alliance versus engaging in an acquisition. We also predict a possible transition from alliances to acquisition base on the alliance's integration of the value chain.