Shareholder Value and Risk Effects of Strategic Alliances

• Main Authors: TURK, Thomas, YBARRA, Candace, GOH, Jeremy C., HSU Junming, LI, Li-ling
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2016
• Subjects: shareholder value; alliances; systematic risk; market value; Finance and Financial Management; Technology and Innovation
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/5047; https://ink.library.smu.edu.sg/context/lkcsb_research/article/6046/viewcontent/ShareholderValue_2016_pvoa.pdf
• Institution: Singapore Management University

This study examines how alliances affect the value and systematic risk of smaller and larger alliance partners. We find smaller partners generally gain from alliances and larger partners generally suffer significant losses. We examine this pattern for different types of alliances, experience with alliances, R&D intensity and relatedness of alliance partners. Gains to the smaller partners are particularly pronounced for technical partners, for smaller partners with high R&D intensity, and for related technical alliances. We also provide evidence that the systematic risk of both alliance partners declines following an alliance announcement, possibly explaining why larger firms engage in alliances with smaller partners despite the limited prospect for gains in market value.