I NTRODUCTION The field of strategic management describes why firms differ in their investment choices and subsequent performance

This paper develops an approach to organizational governance decisions that recognizes how the choice of organizational governance form affects both the creation and appropriation of economic value. The paper begins with a detailed survey of three theoretical approaches— transaction cost economics (TCE), the resource based view (RBV), and real options analysis (RoA) to the study of organizational governance. This review serves to provide background material on each theory as well as to identify the similarities and differences in the assumptions underlying these perspectives. A concluding section provides a series of propositions for future empirical research that may help to integrate these theories by incorporating notions of both value creation and value appropriation. A version of this review article is published as: Leiblein, M.J. 2003. “The choice of organizational governance form and firm performance: Predictions from transaction cost, resource-based, and real options theories,” Journal of Management, Vol. 29(6), pp. 937-962. The development of this paper has benefited from conversations with Sharon Alvarez, Jay Barney, Tailan Chi, Jay Dial, Konstantina Kiousis, Jeff Macher, Doug Miller, Jackson Nickerson, Jeff Reuer, Hyung-deok Shin, and Karen Wruck. I am particularly indebted to JoM editor Daniel Feldman for suggestions offered on this paper. I am solely responsible for any errors or omissions. INTRODUCTION The field of strategic management describes why firms differ in their investment choices and subsequent performance (Rumelt, Schendel, & Teece, 1994). Indeed, much of the work in the field can be categorized into studies that have examined factors that influence one element of strategic choice, organizational governance, and those that have examined how firms’ governance choices affect performance. For example, a prominent strand of strategy research has examined the conditions under which firms are most likely to utilize organizational governance forms such as markets or hierarchies (e.g., Monteverde & Teece, 1982; Walker & Weber, 1984), hierarchies or alliances (e.g., Pisano, 1990), or equity or non-equity alliances (e.g., Oxley, 1997). A second, distinct, stream of research has described how the decision to manage an economic activity through market contracts, alliances, or hierarchy influences performance in terms of indicators such as accounting returns (D’Aveni & Ravenscraft, 1994) or stock market reaction (McGahan & Villalonga, 2003). While these two streams of research both involve the study of various organizational governance forms they have largely been developed independently from one another. For instance, much of the extant research examining why firms choose a particular organizational form follows transaction cost economic theory and argues that the optimal form of organization is primarily driven by efficiency considerations (e.g., Williamson, 1975, 1985). In contrast, prior research that has examined the performance implications of specific resource investments has frequently relied on resource-based reasoning (e.g., Barney; 1986; Rumelt, 1984; Wernerfelt, 1984) to describe the specific characteristics of resources and investments that are most likely to provide sustainable sources of competitive advantage. While work using real option analysis has related the choice between organizational governance forms and overall firm performance (e.g., Bowman & Hurry, 1993; Kogut, 1991), little effort has been put forth to link insights from real