Asymmetric New Product Development Alliances: Win-Win or Win-Lose Partnerships?
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.
Volume (Year): 53 (2007)
Issue (Month): 3 (March)
|Contact details of provider:|| Postal: 7240 Parkway Drive, Suite 300, Hanover, MD 21076 USA|
Web page: http://www.informs.org/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- Asquith, Paul, 1983. "Merger bids, uncertainty, and stockholder returns," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 51-83, April.
- 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.
- Griliches, Zvi, 1990. "Patent Statistics as Economic Indicators: A Survey," Journal of Economic Literature, American Economic Association, vol. 28(4), pages 1661-1707, December.
- Zvi Griliches, 1990. "Patent Statistics as Economic Indicators: A Survey," NBER Working Papers 3301, National Bureau of Economic Research, Inc.
- 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.
- 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.
- 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.
- 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.
- Lee, Lung-Fei, 1983. "Generalized Econometric Models with Selectivity," Econometrica, Econometric Society, vol. 51(2), pages 507-512, March.
- 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.
- repec:fth:harver:1473 is not listed on IDEAS
- 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.
- 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, 02.
- 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.
- 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.
- 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.
- 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. Full references (including those not matched with items on IDEAS)
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.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc)
If references are entirely missing, you can add them using this form.