Build, Borrow, or Buy

CHAPTER 4

When to Borrow via Alliance

Alliance Versus Acquisition

When an arm’s-length contract will not meet your resource needs, you should consider a more complex external relationship. This chapter focuses on deciding between an alliance and a full-scale acquisition. Alliances can take many forms, ranging from relatively straightforward (R&D and marketing partnerships) to potentially quite complex (freestanding joint ventures). Consequently, the agreements that govern alliances span a similar spectrum of complexity, at the high end encompassing multistage contracts, cross-investments, and complicated rights arrangements. However, all alliances involve ongoing interactions in which independent parties commit resources to a joint activity ...