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Firms engage in mergers for many reasons, some of which create value for both the firm's shareholders and society, some that create value only for the firm's shareholders, and some that fail even to do that. A considerable body of research concludes that most mergers do not create value for anyone, except perhaps the investment bankers who negotiated the deal. For a merger to create value, it will usually be necessary that one or both parties is below minimum efficient scale or has valuable underutilized assets. Furthermore, unless heavy coordination and long-term commitment are required, many sources of value from mergers can be achieved through collaboration agreements or other contracts, with less risk to the firms and to economic efficiency. This article outlines the major sources of potential value in mergers, and indicators that can give us insight into a merger's true motives and its likelihood of creating value.

There is growing consensus that the goal of antitrust enforcement should be to manage for dynamic efficiency, that is, an appropriate balance between short-run static efficiencies such as reducing costs and maximizing consumer surplus, and the longer-term gains that arise from innovation. However, determining how to incorporate innovation into efficiency goals is complicated; innovation typically entails great uncertainty, long time horizons, and interdependencies across projects. This means there are no easy solutions for estimating the welfare impact of any given innovation investment or strategy. We can, however, use what we know about how firms manage the innovation process, including how they choose and value projects and ration their capital to meet their short- and long-term needs, to gain insight into how we can best foster firms' incentives to innovate in ways that improve long-run economic welfare. I provide some illustrative examples for how these insights can be incorporated into antitrust enforcement.

In the early to mid-1990s, technology alliances suddenly surged to unprecedented levels—roughly 300% growth per year from 1990 to 1995—and then declined just as precipitously. This massive increase in alliance activity caused the crystallization of a giant component in the global technology network that connected a large portion of the world's firms, government labs, universities, and other organizations. However, when alliance activity declined, the component disintegrated. What caused this spike in alliance activity? And did this large-but-transient change in collaboration activity leave any enduring effect? The data here suggest that a major technology shock may have provoked this alliance surge. A technology shock may simultaneously unleash significant innovation opportunities while creating great uncertainty in the economic environment. Though it is well known that firms often use alliances both to respond to uncertainty and facilitate innovation, little is known about how technology shocks affect the collaboration behavior of firms and how these two factors separately influence innovation outcomes. I integrate an inductive study of collaboration activity and a technology shock with existing research on economics, alliances, and networks to build a set of arguments about how technology shocks will influence alliance behavior, how changes in alliance behavior will influence the global technology collaboration network, and about how each of these changes is likely to influence the innovative outcomes of firms. I then explore the separate and joint effects of the technology shock and collaboration activity on innovation using a large sample panel study of patenting by North American firms.

Theories on the motivation underlying firm boundaries have recently sparked renewed debate. What best explains whether a firm relies on market control or hierarchical control to secure required resources? How do the characteristics of the resources come into play? In this study, we consider a comprehensive path model of the governance mode decision for sourcing technological know-how. By integrating different perspectives on firm boundaries, including transaction cost economics, a resource-based view, and an options perspective, we link characteristics of the technology (i.e., uniqueness, barriers to imitation, commercial uncertainty, technological dynamism) to the perceived threat of opportunism, the potential for sustainable advantage, and the pursuit of a licensing agreement vis-à-vis the outright acquisition of the firm that possesses the desired know-how. We use structural equation modeling to analyze 127 sourcing arrangements. Our results show that technological dynamism and barriers to imitation indirectly influence the governance mode decision by increasing the perceived threat of opportunism. Commercial uncertainty directly influences the governance mode and decreases the likelihood of an acquisition vis-à-vis a licensing agreement. Although uniqueness and barriers to imitation are also positively associated with the perceived potential for sustainable advantage, the potential for sustainable advantage had no direct effect on governance mode. Implications and suggestions for further research are offered.