This paper examines the role of appropriability hazards in strategic alliances and how they influence governance mode choice. It develops a three-stage model of appropriability hazards and applies it to governance mode choice in a "market-hierarchy continuum" of strategic alliances. The study uses empirical data from a large sample of inter-firm alliances to test hypotheses derived from transaction cost theory. The results support the hypothesis that more hierarchical alliances are chosen when appropriability hazards are severe, as technology is difficult to specify or the scope of activities is wider, making monitoring more difficult. The study also finds that firm-level characteristics do not have statistically significant effects, suggesting that the attributes of the transaction, rather than the firm as a whole, determine the more efficient mode of organization in alliances. The paper concludes that the choice of governance mode in strategic alliances is influenced by the severity of appropriability hazards, with more hierarchical governance being preferred when these hazards are more severe. The study also highlights the importance of monitoring and enforcement in technology transfer contracts and the role of transaction-specific characteristics in determining the choice of governance mode.This paper examines the role of appropriability hazards in strategic alliances and how they influence governance mode choice. It develops a three-stage model of appropriability hazards and applies it to governance mode choice in a "market-hierarchy continuum" of strategic alliances. The study uses empirical data from a large sample of inter-firm alliances to test hypotheses derived from transaction cost theory. The results support the hypothesis that more hierarchical alliances are chosen when appropriability hazards are severe, as technology is difficult to specify or the scope of activities is wider, making monitoring more difficult. The study also finds that firm-level characteristics do not have statistically significant effects, suggesting that the attributes of the transaction, rather than the firm as a whole, determine the more efficient mode of organization in alliances. The paper concludes that the choice of governance mode in strategic alliances is influenced by the severity of appropriability hazards, with more hierarchical governance being preferred when these hazards are more severe. The study also highlights the importance of monitoring and enforcement in technology transfer contracts and the role of transaction-specific characteristics in determining the choice of governance mode.