Impact of Strategic Alliances on Firm Valuation

Abstract

This study analyzed 119 strategic alliances formed during the period 1987–91. Using the event study methodology, we found that announcements of technological alliances enjoyed greater abnormal returns in the stock market than marketing alliance announcements, Consistent with our expectations, abnormal returns were negatively correlated with firm profitability and size, indicating that investors perceived more profitable, larger firms as capturing less of the gain generated in alliances. Indeed, the smaller partners in technological alliances appeared to benefit the most. Finally, investor uncertainty increased following alliance announcements for marketing alliances but not for technological alliances.