Joint Venture Formations and Stock Market Reactions: An Assessment in the Information Technology Sector

Abstract

This study examined the impact of joint venture formation strategies on the market value of parent firms in the information technology sector using an event-study perspective. We found that (1) announcements of joint venture formations generally increased market value, (2) ex post, joint ventures were superior to three other cooperative mechanisms, and (3) the magnitude and significance of market valuations differed across types of joint venture strategies. Further, the impact of announcements and managerial assessments of joint ventures' contributions had a positive, significant relationship for a subgroup of firms. That analysis supported the use of stock referents for assessing joint venture performance but highlighted the fundamental differences between intended and realized strategies.