This paper examines the issue of "appropriability hazards," or intellectual property leakage, in strategic alliances, particularly in the context of technology transfer. The author develops a three-stage model to analyze these hazards and applies it to the choice of governance mode in a "market-hierarchy continuum" of strategic alliances. The model considers three key stages: specification of intellectual property rights, monitoring, and enforcement. Empirical analysis of a large sample of inter-firm alliances reveals that more hierarchical alliances are chosen when appropriability hazards are severe, such as when technology is difficult to specify or when the scope of activities is wide, making monitoring challenging. The study provides strong support for transaction cost theory, suggesting that the attributes of the transaction, rather than firm characteristics, determine the most efficient mode of organization in alliances.This paper examines the issue of "appropriability hazards," or intellectual property leakage, in strategic alliances, particularly in the context of technology transfer. The author develops a three-stage model to analyze these hazards and applies it to the choice of governance mode in a "market-hierarchy continuum" of strategic alliances. The model considers three key stages: specification of intellectual property rights, monitoring, and enforcement. Empirical analysis of a large sample of inter-firm alliances reveals that more hierarchical alliances are chosen when appropriability hazards are severe, such as when technology is difficult to specify or when the scope of activities is wide, making monitoring challenging. The study provides strong support for transaction cost theory, suggesting that the attributes of the transaction, rather than firm characteristics, determine the most efficient mode of organization in alliances.