Contractually Stable Alliances

• Author: ANA MAULEON,JOSE J. SEMPERE‐MONERRIS,VINCENT VANNETELBOSCH
• Published date: 01 April 2016
• Date: 01 April 2016
• DOI: http://doi.org/10.1111/jpet.12137

CONTRACTUALLY STABLE ALLIANCES

ANA MAULEON

CEREC, Saint-Louis University—Brussels

JOSE J. SEMPERE-MONERRIS

ERI-CES, University of Valencia

VINCENT VANNETELBOSCH

CORE, University of Louvain

We analyze how different rules for exiting an alliance affect the forma-

tion of strategic alliances. We adopt the concept of contractual stability

to predict the alliances that are going to emerge in the long run. We

find that any asymmetric alliance structure consisting of two alliances is

contractually stable under the unanimity decision rule. In addition, the

grand alliance which is the efficient structure is stable. If we allow for

side payments to compensate former partners, then some less efficient

structures that were stable without side payments are no longer stable.

Moreover, we show that the stability of alliances under the unanimity

rule to exit is robust to the type of firms, myopic or farsighted. Finally,

there is no contractually stable alliance structure under the simple ma-

jority decision rule.

1. Introduction

A common practice for firms is to pool their expertise in partnerships, such as joint

ventures and strategic alliances.1Strategic alliances refer to agreements characterized

1Hagedoorn (2002) has reported that in 2000 there were 199 strategic alliances in the biotechnology

industry out of 575 strategic alliances counted overall, making biotechnology the first industry in the

ranking followed by information technology (184 alliances) and automotive (53 alliances). See also

Baker, Gibbons, and Murphy (2008). However, Link and Bauer (1989) have reported that the number

of alliances and the number of firms forming an alliance varies widely across industries and research

projects.

Ana Mauleon, CEREC, Saint-Louis University—Brussels; CORE, University of Louvain, Louvain-la-

Neuve, Belgium (ana.mauleon@usaintlouis.be). Jose J. Sempere-Monerris, Department of Economic

Analysis and ERI-CES, University of Valencia, Valencia, Spain; CORE, University of Louvain, Bel-

gium (Jose.J.Sempere@uv.es). Vincent Vannetelbosch,CORE, University of Louvain, Louvain-la-Neuve;

CEREC, Saint-Louis University—Brussels, Belgium (vincent.vannetelbosch@uclouvain.be).

We would like to thank two anonymous referees and the associate editor for helpful comments.

Ana Mauleon and Vincent Vannetelbosch are Senior Research Associates of the National Fund for

Scientific Research (FNRS). Financial support from the Spanish Ministry of Economy and Competition

and FEDER under the project ECO2012-35820 and the project ECO2013-45045-R, and support from

Generalitat Valenciana under the project PROMETEO/2009/068 are gratefully acknowledged.

Received August 22, 2014; Accepted October 11, 2014.

C2014 Wiley Periodicals, Inc.

Journal of Public Economic Theory, 18 (2), 2016, pp. 212–225.

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