Hand(l)ing the Reins of Corporate Resources: Evidence from Acquisitions

The allocation of control over resources is a common topic in corporate strategy research. Though firms could keep control at the corporate-level and guarantee their availability to the entire corporation, delegating control to individual business units increases incentives to exploit resources more efficiently. We employ transaction cost theory to understand the trade-offs faced in control allocation decisions and particularly focus on technological resources, specifically patents, as a unique yet evermore important type of resource. Assuming that delegated control to business units is more efficient, we propose that corporations will main central control when such delegated control over technological resources is more likely to result in inter-unit haggling issues or coordination problems. These effects should be stronger for technologically diverse firms as resources have broader applicability and such events are more likely to occur. We find partial support for these postulations in a sample of acquisitions where control over acquired resources needs to be allocated. These findings contribute to the literature on resource allocation, acquisition integration, and R&D structures.