IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v53y2007i3p357-374.html
   My bibliography  Save this article

Asymmetric New Product Development Alliances: Win-Win or Win-Lose Partnerships?

Author

Listed:
  • Kartik Kalaignanam

    (Department of Marketing, Mays Business School, Texas A& M University, 4112 TAMU, College Station, Texas 77843-4112)

  • Venkatesh Shankar

    (Department of Marketing, Mays Business School, Texas A& M University, 4112 TAMU, College Station, Texas 77843-4112)

  • Rajan Varadarajan

    (Department of Marketing, Mays Business School, Texas A& M University, 4112 TAMU, College Station, Texas 77843-4112)

Abstract

Interorganizational alliances are widely recognized as critical to product innovation, particularly in high-technology markets. Many new product development (NPD) alliances tend to be asymmetric, that is, they are formed between a larger firm and a smaller firm. As is the case with alliances in general, asymmetric alliances also typically result in changes in the shareholder values of the partner firms. Are the changes in shareholder values of the partner firms significant? Are asymmetric NPD alliances win-win or win-lose partnerships? Are the gains or losses symmetric for the larger and smaller partner firms? What factors drive the changes in shareholder values of the partner firms? These important questions remain largely unexplored as evidenced by the dearth of empirical research on the effect of asymmetric NPD alliances on shareholder value and on the apportionment of this value between the partner firms. We develop and empirically test a model of short-term changes in shareholder values of larger and smaller firms involved in NPD alliances, using the event study methodology on data covering 167 asymmetric alliances in the information technology and communication industries. In this model, we examine alliance, firm, and partner characteristics as potential determinants of the changes in shareholder values of the partner firms due to an NPD alliance announcement. Our model accounts for selection correction, potential cross-correlation across the residuals from the models of firm value changes for the larger and smaller firms, and unobserved heterogeneity. The results suggest that both the partners experience significant short-term financial gains, but there are considerable asymmetries between the larger and smaller firms with regard to the effects of alliance, partner, and firm characteristics on the gains of the partner firms. The results relating to alliance characteristics suggest that while a broad scope alliance enhances the financial gains for the larger firm, a scale R& D alliance (relative to a link alliance) contributes positively to the financial gains for the smaller firm. With regard to partner characteristics, while partner alliance experience positively influences the financial gains for the larger firm, it has no significant effect on the financial returns for the smaller firm. Further, partner innovativeness is positively associated with the financial gains for the larger firm, but partner reputation is unrelated to the financial gains of the smaller firm. Regarding firm characteristics, the magnitude of the financial gains accruing from a firm's own alliance experience is considerably higher for the smaller firm than it is for the larger firm. We outline the implications of the research findings for future research and management practice.

Suggested Citation

  • Kartik Kalaignanam & Venkatesh Shankar & Rajan Varadarajan, 2007. "Asymmetric New Product Development Alliances: Win-Win or Win-Lose Partnerships?," Management Science, INFORMS, vol. 53(3), pages 357-374, March.
    • Handle: RePEc:inm:ormnsc:v:53:y:2007:i:3:p:357-374
    DOI: 10.1287/mnsc.1060.0642
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.1060.0642
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mnsc.1060.0642?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Joel A. C. Baum & Tony Calabrese & Brian S. Silverman, 2000. "Don't go it alone: alliance network composition and startups' performance in Canadian biotechnology," Strategic Management Journal, Wiley Blackwell, vol. 21(3), pages 267-294, March.
    2. Michael Hitt & M. Tina Dacin & Edward Levitas & Jean-Luc Arregle & Anca Borza, 2000. "Partner Selection in Emerging and Developed Market Contexts : Resource-Based and Organizational Learning Perspectives," Post-Print hal-02276706, HAL.
    3. Acs, Zoltan J & Audretsch, David B, 1988. "Innovation in Large and Small Firms: An Empirical Analysis," American Economic Review, American Economic Association, vol. 78(4), pages 678-690, September.
    4. Zvi Griliches, 1984. "R&D, Patents, and Productivity," NBER Books, National Bureau of Economic Research, Inc, number gril84-1, March.
    5. Acs, Zoltan J & Audretsch, David B & Feldman, Maryann P, 1994. "R&D Spillovers and Recipient Firm Size," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 336-340, May.
    6. McConnell, John J & Nantell, Timothy J, 1985. "Corporate Combinations and Common Stock Returns: The Case of Joint Ventures," Journal of Finance, American Finance Association, vol. 40(2), pages 519-536, June.
    7. Lerner, Josh & Merges, Robert P, 1998. "The Control of Technology Alliances: An Empirical Analysis of the Biotechnology Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 46(2), pages 125-156, June.
    8. Jonathan T. Eckhardt & Scott Shane & Frédéric Delmar, 2006. "Multistage Selection and the Financing of New Ventures," Management Science, INFORMS, vol. 52(2), pages 220-232, February.
    9. repec:fth:harver:1473 is not listed on IDEAS
    10. Zvi Griliches, 1998. "Patent Statistics as Economic Indicators: A Survey," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 287-343, National Bureau of Economic Research, Inc.
    11. Josh Lerner & Robert P. Merges, 1998. "The Control of Technology Alliances: An Empirical Analysis of the Biotechnology Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 46(2), pages 125-156, June.
    12. Scott Shane & Venkatesh Shankar & Ashwin Aravindakshan, 2006. "The Effects of New Franchisor Partnering Strategies on Franchise System Size," Management Science, INFORMS, vol. 52(5), pages 773-787, May.
    13. John Bound & Clint Cummins & Zvi Griliches & Bronwyn H. Hall & Adam B. Jaffe, 1984. "Who Does R&D and Who Patents?," NBER Chapters, in: R&D, Patents, and Productivity, pages 21-54, National Bureau of Economic Research, Inc.
    14. Pierre Dussauge & Bernard Garrette & Will Mitchell, 2000. "Learning from competing partners: outcomes and durations of scale and link alliances in Europe, North America and Asia," Strategic Management Journal, Wiley Blackwell, vol. 21(2), pages 99-126, February.
    15. Brown, Stephen J. & Warner, Jerold B., 1985. "Using daily stock returns : The case of event studies," Journal of Financial Economics, Elsevier, vol. 14(1), pages 3-31, March.
    16. Asquith, Paul, 1983. "Merger bids, uncertainty, and stockholder returns," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 51-83, April.
    17. Rachelle C. Sampson, 2005. "Experience effects and collaborative returns in R&D alliances," Strategic Management Journal, Wiley Blackwell, vol. 26(11), pages 1009-1031, November.
    18. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
    19. Lee, Lung-Fei, 1983. "Generalized Econometric Models with Selectivity," Econometrica, Econometric Society, vol. 51(2), pages 507-512, March.
    20. Michael Hitt & M. Tina Dacin & Edward Levitas & Jean-Luc Arregle & Anca Borza, 2000. "Partner Selection in Emerging and Developed Market Contexts : Resource-Based and Organizational Learning Perspectives," Post-Print hal-02312691, HAL.
    21. Schwert, G William, 1981. "Using Financial Data to Measure Effects of Regulation," Journal of Law and Economics, University of Chicago Press, vol. 24(1), pages 121-158, April.
    22. Bharat N. Anand & Tarun Khanna, 2000. "Do firms learn to create value? The case of alliances," Strategic Management Journal, Wiley Blackwell, vol. 21(3), pages 295-315, March.
    23. Joanne E. Oxley & Rachelle C. Sampson, 2004. "The scope and governance of international R&D alliances," Strategic Management Journal, Wiley Blackwell, vol. 25(8‐9), pages 723-749, August.
    24. Toby E. Stuart, 2000. "Interorganizational alliances and the performance of firms: a study of growth and innovation rates in a high‐technology industry," Strategic Management Journal, Wiley Blackwell, vol. 21(8), pages 791-811, August.
    25. John D. Lyon & Brad M. Barber & Chih‐Ling Tsai, 1999. "Improved Methods for Tests of Long‐Run Abnormal Stock Returns," Journal of Finance, American Finance Association, vol. 54(1), pages 165-201, February.
    26. Bernard Garrette & Pierre Dussauge & Will Mitchell, 2000. "Learning from competing partners: outcomes and durations of scale and link alliances in Europe, North America and Asia," Post-Print hal-00458812, HAL.
    27. 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.
    28. Frank T. Rothaermel, 2001. "Incumbent's advantage through exploiting complementary assets via interfirm cooperation," Strategic Management Journal, Wiley Blackwell, vol. 22(6‐7), pages 687-699, June.
    29. Audretsch, David B & Mahmood, Talat, 1995. "New Firm Survival: New Results Using a Hazard Function," The Review of Economics and Statistics, MIT Press, vol. 77(1), pages 97-103, February.
    30. Ranjay Gulati & Monica C. Higgins, 2003. "Which ties matter when? the contingent effects of interorganizational partnerships on IPO success," Strategic Management Journal, Wiley Blackwell, vol. 24(2), pages 127-144, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Oh, Yoojin & Yoo, Nina, 2022. "Effective cooperation modes based on cultural and market similarities in interfirm relationships," Journal of International Management, Elsevier, vol. 28(1).
    2. Stienstra, Miranda, 2020. "The determinants and performance implications of alliance partner acquisition," Other publications TiSEM 7fdee0c2-d4d2-4f5b-95e3-2, Tilburg University, School of Economics and Management.
    3. Golonka, Monika, 2015. "Proactive cooperation with strangers: Enhancing complexity of the ICT firms' alliance portfolio and their innovativeness," European Management Journal, Elsevier, vol. 33(3), pages 168-178.
    4. Juasrikul, Sakdipon & Sahaym, Arvin & Yim, Hyunsoon (Sean) & Liu, Richie L., 2018. "Do cross-border alliances with MNEs from developed economies create firm value for MNEs from emerging economies?," Journal of Business Research, Elsevier, vol. 93(C), pages 98-110.
    5. Chou, Ting-Kai & Ou, Chin-Shyh & Tsai, Shu-Huan, 2014. "Value of strategic alliances: Evidence from the bond market," Journal of Banking & Finance, Elsevier, vol. 42(C), pages 42-59.
    6. Lai, Jung-Ho & Chang, Shao-Chi & Chen, Sheng-Syan, 2010. "Is experience valuable in international strategic alliances?," Journal of International Management, Elsevier, vol. 16(3), pages 247-261, September.
    7. Jongkuk Lee & Glenn Hoetker & William Qualls, 2015. "Alliance Experience and Governance Flexibility," Organization Science, INFORMS, vol. 26(5), pages 1536-1551, October.
    8. Li, Dan, 2013. "Multilateral R&D alliances by new ventures," Journal of Business Venturing, Elsevier, vol. 28(2), pages 241-260.
    9. John Hagedoorn & Boris Lokshin & Stéphane Malo, 2018. "Alliances and the innovation performance of corporate and public research spin-off firms," Small Business Economics, Springer, vol. 50(4), pages 763-781, April.
    10. Kavusan, K., 2015. "Essays on capability development through alliances," Other publications TiSEM 8eb736a5-b217-4718-ac13-d, Tilburg University, School of Economics and Management.
    11. Beshears, John, 2013. "The performance of corporate alliances: Evidence from oil and gas drilling in the Gulf of Mexico," Journal of Financial Economics, Elsevier, vol. 110(2), pages 324-346.
    12. Dovev Lavie & Stewart R. Miller, 2008. "Alliance Portfolio Internationalization and Firm Performance," Organization Science, INFORMS, vol. 19(4), pages 623-646, August.
    13. Häussler, Carolin, 2004. "Does Partnering Pay Off? - Stock Market Reactions to Inter-Firm Collaboration Announcements in Germany," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 14, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    14. Jianping Qi & Ninon K. Sutton & Qiancheng Zheng, 0. "The value of innovation and the spillover effect on alliance partners," Review of Quantitative Finance and Accounting, Springer, vol. 0, pages 1-31.
    15. Hanna Hottenrott & Cindy Lopes-Bento, 2015. "Quantity or quality? Knowledge alliances and their effects on patenting," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 24(5), pages 981-1011.
    16. Sandy Campart & Etienne Pfister, 2007. "Technology, Cooperation And Stock Market Value: An Event Study Of New Partnership Announcements In The Biotechnology And Pharmaceutical Industries," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 16(1), pages 31-49.
    17. Ramin Vandaie & Akbar Zaheer, 2015. "Alliance Partners and Firm Capability: Evidence from the Motion Picture Industry," Organization Science, INFORMS, vol. 26(1), pages 22-36, February.
    18. Shivaram V. Devarakonda & Jeffrey J. Reuer, 2019. "Safeguarding from the Sharks: Board Representation in Minority Equity Partnerships," Organization Science, INFORMS, vol. 30(5), pages 981-999, September.
    19. Jianping Qi & Ninon K. Sutton & Qiancheng Zheng, 2020. "The value of innovation and the spillover effect on alliance partners," Review of Quantitative Finance and Accounting, Springer, vol. 55(4), pages 1427-1457, November.
    20. Wilfried Zidorn & Marcus Wagner, 2012. "Too Much of a Good Thing: The Role of Alliance Portfolio Diversity for Innovation Output in the Biotechnology Industry," DRUID Working Papers 12-10, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:53:y:2007:i:3:p:357-374. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.