Firms not only combine resources within firm boundaries but tap into, acquire, or consolidate resources outside firm boundaries. Alliances and mergers and acquisitions (M&A) are distinct vehicles for governing inter-firm resource combinations. Prior studies on the governance choice between them have relied on firm- or dyad-level attributes to explicate the choice firms make about the governance. However, any firm or dyad is a micro-structure embedded in networks that shape the flow of information and resources to the focal firm or dyad. In addition, although alliances and mergers and acquisitions involve either horizontal or vertical resource combinations, the vertical dimension of resource relatedness has been largely neglected in prior research. This study examines the impact of structural embeddedness and vertical resource relatedness on governance choice. We find that structural embeddedness is an important driver of governance choice and that a significant portion of resource combinations occurs along the vertical dimension of relatedness.
