Chapter 10: Value enhancing in the governance decision process: A Portfolio Theory Perspective on Strategic Alliances and Mergers and Acquisitions

The present work discusses how the value generation potential from strategic alliances can be enhanced by adopting a portfolio perspective in the governance decision process. A growing research stream has argued that corporate performance is fostered not by a single link but by the entire portfolio of external relationships the company is engaged in. Recent developments also suggest that in a well-balanced view various external sourcing modalities need to be considered. The main message from the above research stream encourages companies to look at their external relationships in an integrated fashion as interdependencies emphasize the value generation potential of strategic alliances and other governance modalities. In the context of our study, we argue that the insights gained by the content-related literature on the key value drivers of external sourcing may be embedded in the governance decision process. In order to contribute to both the literature and managerial practice, we go further than the mere elaboration of propositions and, by formalizing in an ordered sequence the decision steps that should be undertaken, we provide a conceptual decisional model to be used as a reference term. We ground our approach on financial Portfolio Theory whose guidelines are interpreted in the context of the governance decision process and integrated in a decision model. The present work contributes to the literature by proposing a model where the governance modes are not conceived as independent choices but as elements of balance and integration within a portfolio.