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Strategic alliance as a response to the threat of entry: Evidence from airline codesharing


  • Goetz, Christopher F.
  • Shapiro, Adam Hale


Strategic alliances are arrangements in which firms combine efforts and resources to jointly pursue a business objective while remaining separate entities. An example of such a practice is airline codesharing, in which allied carriers engage in the cooperative marketing of certain flights. We empirically test for the presence of competitive motives behind such alliances by identifying an incumbent airline's use of codesharing in response to the threat of future entry by a competitor. Using within-flight segment, fixed-effects regressions on panel data from 1998 to 2010, we estimate the impact of exogenous threats of entry on an airline's decision whether to codeshare with a partner on a specific segment. Estimates show that when an incumbent carrier's segment is threatened by a low-cost competitor it is approximately 25% more likely than average to be codeshared with its partner. Further tests show that this effect depends strongly upon the level of market share that the airline has on the segment in question. We interpret this as evidence of a strategic alliance being used to preemptively act in anticipation of future competition.

Suggested Citation

  • Goetz, Christopher F. & Shapiro, Adam Hale, 2012. "Strategic alliance as a response to the threat of entry: Evidence from airline codesharing," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 735-747.
  • Handle: RePEc:eee:indorg:v:30:y:2012:i:6:p:735-747 DOI: 10.1016/j.ijindorg.2012.08.003

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    References listed on IDEAS

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    Cited by:

    1. Alderighi, Marco & Gaggero, Alberto A. & Piga, Claudio A., 2015. "The effect of code-share agreements on the temporal profile of airline fares," Transportation Research Part A: Policy and Practice, Elsevier, vol. 79(C), pages 42-54.
    2. Garg, Chandra Prakash, 2016. "A robust hybrid decision model for evaluation and selection of the strategic alliance partner in the airline industry," Journal of Air Transport Management, Elsevier, vol. 52(C), pages 55-66.
    3. Alderighi, Marco & Gaggero, Alberto A., 2014. "The effects of global alliances on international flight frequencies: Some evidence from Italy," Journal of Air Transport Management, Elsevier, vol. 39(C), pages 30-33.
    4. repec:eee:jfinec:v:127:y:2018:i:2:p:226-247 is not listed on IDEAS
    5. Dunn, Abe & Shapiro, Adam Hale, 2015. "Physician payments under health care reform," Journal of Health Economics, Elsevier, vol. 39(C), pages 89-105.
    6. Gayle, Philip & Xie, Xin, 2017. "Entry Deterrence and Strategic Alliances," MPRA Paper 83233, University Library of Munich, Germany.
    7. Chao, Ching-Cheng & Kao, Ko-Ting, 2015. "Selection of strategic cargo alliance by airlines," Journal of Air Transport Management, Elsevier, vol. 43(C), pages 29-36.
    8. Lohmann, Gui & Vianna, Camila, 2016. "Air route suspension: The role of stakeholder engagement and aviation and non-aviation factors," Journal of Air Transport Management, Elsevier, vol. 53(C), pages 199-210.
    9. Christopher Gedge & James W. Roberts & Andrew Sweeting, 2014. "A Model of Dynamic Limit Pricing with an Application to the Airline Industry," NBER Working Papers 20293, National Bureau of Economic Research, Inc.


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