Team Up or Take Over? Strategic Drivers of Firms' Alliance and Acquisition Decisions

Journal of Marketing Research Scholarly Insights are produced in partnership with the AMA Doctoral Students SIG – a shared interest network for Marketing PhD students across the world.

The Apple–IBM alliance announced in 2014 drew significant public attention because it brought together two large firms with very different strengths and a complicated history. Similarly, Amazon’s acquisition of Whole Foods in 2017 attracted widespread attention because it brought together two large firms—one rooted in e-commerce and technology, the other in premium brick-and-mortar grocery retail. These events raise a simple but important question: Why do firms sometimes choose to ally rather than acquire those capabilities outright?

Value Appropriation Versus Value Creation

Firms usually have two main outside options for growth: forming an alliance or making an acquisition. A recent Journal of Marketing Research article shows that this choice is neither random nor just about industry norms. Instead, such a choice is systematically linked to the firm’s strategic emphasis—whether it focuses more on appropriation (i.e., a focus on marketing) or value creation (i.e., a focus on R&D). The article is impactful as it moves the field’s knowledge from a simple observation like “tech firms ally a lot” or “marketing firms prefer acquisitions” to a theory-based explanation of why firms choose one governance mode over another, and what the limiting conditions for this decision might be.

The authors analyzed 1,053 publicly listed U.S. firms that engaged in more than 6,500 acquisition and alliance transactions between 2009 and 2016. The findings suggest that the critical trade-off between “value appropriation” (focus on marketing assets such as brand equity) and “value creation” (focus on innovation through investment in R&D) is associated with the choice between forming an alliance versus pursuing an acquisition. When a firm emphasizes value appropriation, relying predominantly on marketing assets (such as brand equity and customer relationships) rather than R&D assets, valuation ambiguity makes alliances risky, thereby making full acquisition a preferable governance choice.

Boundary Conditions

Moreover, the research explored two critical boundary conditions that may modify such a trajectory: The authors examined how the presence of a Chief Marketing Officer (CMO) and coverage by financial analysts effectively affect these alliance risks. CMOs play a critical role in facilitating the transfer of tacit knowledge and in clarifying and translating the value of marketing assets into more concrete information for prospective partners. Financial analysts play an important role in linking a firm’s strategic value emphasis to its choice of governance mode by actively shaping the information environment in which governance decisions are made. Analyst coverage provides validation and legitimacy for a firm, making alliances much safer.

Governance mode choice should not be treated as a one-size-fits-all decision; it should depend on whether the firm is more focused on value appropriation or value creation.

The study finds firms that align the “to acquire or to ally” choice with their strategic emphasis are associated with higher financial performance, as reflected in high stock returns. Overall, the article provides valuable guidance for managers seeking growth while protecting key assets and maximizing firm value.

We had the opportunity to contact the authors to learn more about their study and gain further insights. In the conversation below, the authors share their perspectives on key takeaways for C-suite executives and managers. 

Q. What motivated you to think beyond the traditional transaction cost economics and focus on strategic emphasis? Was there a specific real-world observation?

A: In early genesis conversations about our research, we noticed that the emerging research on strategic emphasis in marketing focused heavily on performance outcomes but was largely silent on how emphasis shapes a firm’s internal governance structures—the very domain where transaction cost economics and organizational theory have the most to say. We thought there was a great opportunity to synthesize insights by blending both sides.

Q. Did your analysis reveal any unexpected findings or patterns that challenged your initial expectations?

A: As our paper is a theory-testing effort, we were disciplined in our hypotheses rather than seeking unexpected patterns. That said, we were genuinely surprised that the transaction cost and resource-based views largely yielded converging insights, despite rarely engaging with one another, which, in hindsight, suggests these traditions have more to offer each other than the literature has acknowledged. Additionally, our results recast the CMO’s role as more of a relationship-builder than a power consolidator, which runs counter to how the marketing power literature typically frames this position.

Our research did not focus on heterogeneity in effects across industries. Instead, it relied on internal and external governance mechanisms, consistent with transaction cost theorizing rooted in governance mechanisms more broadly.

Q. How should managers interpret the CMO’s role in acquisition versus alliance decisions, and what actionable insights follow from this result?

A: Our results indicate that the CMO’s role is central to relational structures within the organization, enabling them to prioritize and refocus the firm’s direction toward alliances as the firm becomes more value-appropriating. This particular aspect of a CMO’s role has not been studied extensively—most papers focus on marketing power and marketing expenditures as proxies for CMO influence. We bring a new lens from organizational theory to the discussion, reframing the CMO’s role as a relational governance mechanism rather than merely a functional leader.

Q. What practical recommendations would you offer executives looking to leverage analyst coverage as an active strategic lever for growth?

A: Managers cannot influence analysts directly—our paper treats analyst coverage as an exogenous moderator uninfluenced by the firm’s managers. However, managers can shape the information environment in which analysts operate. For instance, voluntary disclosure of demand-side metrics—customer acquisition costs, retention rates, partner pipeline health—at investor days or in earnings communications can help analysts value the firm more accurately, which in turn can discipline how the market interprets the firm’s governance choices.

Q. What critical governance and risk management capabilities does a firm lose when it eliminates the CMO role?

A: Our theorizing indicates that the CMO’s role is fundamentally internal governance-centric, as it pertains to safeguarding the firm’s relational endeavors. The CMO serves almost as a non-fiduciary agent for customers and partners within the firm—a bridge that filters demand-side information to the upper echelons. Eliminating this role creates an asymmetry in the C-suite: the CFO and COO retain their seats, so the top management team’s information diet tilts toward supply-side and financial signals at the expense of demand-side intelligence. This can leave the firm’s organizational structure weakened precisely where it needs strength: in representing the external constituents that drive long-term value.

Q. What would be your suggestions for scholars and practitioners to extend this study further?

A: Our research is one of the first to blend traditional marketing-finance research with organizational theory, but much remains unexplored. Hybrid theories that examine the CMO’s role as a non-fiduciary agent to an external principal—customers and partners—can be particularly interesting to investigate. Relatedly, our study can be extended to mono- versus multi-branded firms, where the implications for strategic emphasis differ considerably. Multi-brand firms face more complex relational governance demands across diverse stakeholder sets, making the non-fiduciary agent framing especially relevant. Together, these directions point toward a richer organizational theory of the marketing function.

Source: Girish Mallapragada, Raghu Bommaraju, Alok Kumar, and Kiran Pedada (2025), “To Acquire or to Ally? The Impact of Strategic Emphasis on Governance Mode Choice,” Journal of Marketing Research, 62 (4), 645–63.

Go to the Journal of Marketing Research