Knowhow, Core Competencies, and the Choice between Merging, Allying, and Buying Assets

51 Pages Posted: 14 Jun 2006

See all articles by Michel A. Habib

Michel A. Habib

University of Zurich; Swiss Finance Institute

Pierre Mella-Barral

Toulouse Business School

Date Written: January 2007

Abstract

We characterize the conditions under which two firms choose to (i) merge, (ii) form an alliance, or (iii) trade assets. For that purpose, we distinguish between the firms' assets, their knowhow, and their core competencies. We show that a merger is chosen when the two firms have similar core competencies. When one firm has markedly higher core competencies than the other, that firm operates the assets separately if it also has markedly higher knowhow. Finally, an alliance is chosen when the firm with markedly higher core competencies has markedly lower knowhow.

Keywords: Mergers, Alliances, Asset Sales, Knowhow, Core Competencies, Dissolution, Superseding, Dynamic Corporate Finance.

JEL Classification: G34

Suggested Citation

Habib, Michel A. and Mella-Barral, Pierre, Knowhow, Core Competencies, and the Choice between Merging, Allying, and Buying Assets (January 2007). EFA 2006 Zurich Meetings, Available at SSRN: https://ssrn.com/abstract=890242 or http://dx.doi.org/10.2139/ssrn.890242

Michel A. Habib (Contact Author)

University of Zurich ( email )

Plattenstrasse 14
Zurich, 8032
Switzerland
41-44-634-2507 (Phone)
41-44-634-4903 (Fax)

HOME PAGE: http://www.isb.uzh.ch/institut/profs/mhabib.htm

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Pierre Mella-Barral

Toulouse Business School ( email )

20, bd Lascrosses
Toulouse, 31068
France

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