Parties in an alliance aim to capture both common and private benefits. As they transfer and jointly create knowledge to generate common gains, differences in private benefits can arise due to asymmetric knowledge spillovers. Our model of alliance structural choices incorporates the alliance itself—the channel through which partner knowledge flows—to reflect the fact that partners and the alliance may operate in different industry contexts. We propose that partners select structural governance mechanisms (equity governance and alliance scope) to enable valuable knowledge flows while protecting themselves from unwanted spillovers. Analyzing a large sample of U.S. alliances from 1985 to 2024, we find that asymmetric distance predicts these governance choices and that it is linked to the simultaneous use of multiple structural safeguards, including equity governance and a narrow alliance scope.
Grove et al. (Thu,) studied this question.