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International alliance formation and stock market responses:: Industry globalization as an environmental contingency

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  • Park, Jong-Hun
  • Kim, Kwangsoo
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    Abstract

    This study examines the effects of the degree of industry globalization on international alliance formation in terms of the type of alliance chosen by partner firms and stock market responses to the chosen type of alliance. Using a sample of 244 international alliances formed between U.S. and non-U.S. firms for the 1992-97 period, we find that nonjoint venture (joint venture) alliances take place relatively more frequently in global (multidomestic) industries than in multidomestic (global) industries. We also find that in global industries, abnormal returns to nonjoint venture partners are relatively greater than those to joint venture partners, whereas in multidomestic industries, abnormal returns to nonjoint venture partners are relatively smaller, though insignificant, than those to joint venture partners. Our findings suggest that the degree of industry globalization plays an important role in explaining which type of international alliance is likely to be chosen by partner firms when entering an alliance and how stock markets tend to respond to the chosen type of alliance.

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    File URL: http://www.sciencedirect.com/science/article/pii/S1075425399000186
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of International Management.

    Volume (Year): 5 (1999)
    Issue (Month): 4 ()
    Pages: 267-284

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    Handle: RePEc:eee:intman:v:5:y:1999:i:4:p:267-284

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    Related research

    Keywords: International alliances Industry globalization Alliance type Stock market reactions;

    References

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    1. Thompson, Rex, 1985. "Conditioning the Return-Generating Process on Firm-Specific Events: A Discussion of Event Study Methods," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 20(02), pages 151-168, June.
    2. Pierre Dussauge & Bernard Garrette, 1995. "Determinants of Success in International Strategic Alliances: Evidence from the Global Aerospace Industry," Journal of International Business Studies, Palgrave Macmillan, vol. 26(3), pages 505-530, September.
    3. Mody, Ashoka, 1993. "Learning through alliances," Journal of Economic Behavior & Organization, Elsevier, vol. 20(2), pages 151-170, February.
    4. Su, Han Chan & Kensinger, John W. & Keown, Arthur J. & Martin, John D., 1997. "Do strategic alliances create value?," Journal of Financial Economics, Elsevier, vol. 46(2), pages 199-221, November.
    5. Banerji, Kunal & Sambharya, Rakesh B., 1998. "Effect of network organization on alliance formation: A study of the Japanese automobile ancillary industry," Journal of International Management, Elsevier, vol. 4(1), pages 41-57, July.
    6. J Michael Geringer & Louis Hebert, 1989. "Control and Performance of International Joint Ventures," Journal of International Business Studies, Palgrave Macmillan, vol. 20(2), pages 235-254, June.
    7. Brown, Stephen J. & Warner, Jerold B., 1980. "Measuring security price performance," Journal of Financial Economics, Elsevier, vol. 8(3), pages 205-258, September.
    8. J Michael Geringer & Louis Hebert, 1991. "Measuring Performance of International Joint Ventures," Journal of International Business Studies, Palgrave Macmillan, vol. 22(2), pages 249-263, June.
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    Cited by:
    1. Oum, Tae H. & Park, Jong-Hun & Kim, Kwangsoo & Yu, Chunyan, 2004. "The effect of horizontal alliances on firm productivity and profitability: evidence from the global airline industry," Journal of Business Research, Elsevier, vol. 57(8), pages 844-853, August.

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