Does Partnering Pay Off? - Stock Market Reactions to Inter-Firm Collaboration Announcements in Germany

The dramatic increase in interorganizational partnering in the last two decades raises questions for scholars and managers regarding the value impact of inter-firm collaborations. Using event study methodology, this paper tests whether stock market reactions differ when a collaboration formation or termination is announced. In addition, the study provides an in-depth analysis of potential determinants of stock market reactions to collaboration formation announcements. The sample consists of 1037 announcements in German stock markets from 1997 to 2002. The results show that an unexpected termination announcement decreases firm valuation, and a formation announcement increases firm valuation. Further, certain collaborations are more favorable than others, depending on firm industry, age, size, collaboration constellations, and equity versus non-equity investment in partner firm. The results open avenues for further research on partnering strategies

Termination Clauses in Partnerships

In this paper, we prove that two firms can choose not to include a termination clause in their partnership contract, thus inducing a costly termination in case of failure of the joint project. This ex-post inefficiency induces partners to exert large non-contractible efforts (investments) to decrease the probability of failure. Therefore, the absence of a termination clause works as a ``discipline device''\ that mitigates the moral hazard problem within the partnership. We show that writing a contract without a termination clause is a credible commitment even when partners can add such a clause in the contract in any moment of their relationship.moral hazard, termination clauses, partnerships, joint ventures

Termination Clauses in Partnerships

In this paper, we prove that two firms may prefer not to include a termination clause in their partnership contract, thus inducing a costly termination in case of failure of the joint project. This ex-post inefficiency induces partners to exert large levels of non-contractible efforts (investments) in order to decrease the probability of failure. Therefore, the absence of a termination clause works as a "discipline device" that mitigates the hold-up problem within the partnership. We show that writing a contract without a termination clause is a credible commitment even when partners can add such a clause in the contract in any moment of their relationship. Comparative statics analysis suggests that contracts lacking a termination clause are suited to alliances in R&D, when partners are not rivals or when they have strong technological complementarities.hold-up; termination clauses; partnerships; joint ventures

Public-public partnerships (PUPs) in water

A comprehensive global analysis of the use of public-public partnerships in water in over 60 countries

Public-public partnerships (PUPs) in water

Water operators need to be efficient, accountable, honest public institutions providing a universal service. Many water services however lack the institutional strength, the human resources, the technical expertise and equipment, or the financial or managerial capacity to provide these services. They need support to develop these capacities. The vast majority of water operators in the world are in the public sector – 90% of all major cities are served by such bodies. This means that the largest pool of experience and expertise, and the great majority of examples of good practice and sound institutions, are to be found in existing public sector water operators. Because they are public sector, however, they do not have any natural commercial incentive to provide international support. Their incentive stems from solidarity, not profit. Since 1990, however, the policies of donors and development banks have focussed on the private companies and their incentives. The vast resources of the public sector have been overlooked, even blocked by pro-private policies. Out of sight of these global policy-makers, however, a growing number of public sector water companies have been engaged, in a great variety of ways, in helping others develop the capacity to be effective and accountable public services. These supportive arrangements are now called 'public-public partnerships' (PUPs). A public-public partnership (PUP) is simply a collaboration between two or more public authorities or organisations, based on solidarity, to improve the capacity and effectiveness of one partner in providing public water or sanitation services. They have been described as: “a peer relationship forged around common values and objectives, which exclude profit-seeking”.1 Neither partner expects a commercial profit, directly or indirectly. This makes PUPs very different from the public–private partnerships (PPPs) which have been promoted by the international financial institutions (IFIs) like the World Bank. The problems of PPPs have been examined in a number of reports. A great advantage of PUPs is that they avoid the risks of such partnerships: transaction costs, contract failure, renegotiation, the complexities of regulation, commercial opportunism, monopoly pricing, commercial secrecy, currency risk, and lack of public legitimacy.2 PUPs are not merely an abstract concept. The list in the annexe to this paper includes over 130 PUPs in around 70 countries. This means that far more countries have hosted PUPs than host PPPs in water – according to a report from PPIAF in December 2008, there are only 44 countries with private participation in water. These PUPs cover a period of over 20 years, and been used in all regions of the world. The earliest date to the 1980s, when the Yokohama Waterworks Bureau first started partnerships to help train staff in other Asian countries. Many of the PUP projects have been initiated in the last few years, a result of the growing recognition of PUPs as a tool for achieving improvements in public water management. This paper attempts to provide an overview of the typical objectives of PUPs; the different forms of PUPs and partners involved; a series of case studies of actual PUPs; and an examination of the recent WOPs initiative. It then offers recommendations for future development of PUPs

Does Partnering Pay Off? - Stock Market Reactions to Inter-Firm Collaboration Announcements in Germany

The dramatic increase in interorganizational partnering in the last two decades raises questions for scholars and managers regarding the value impact of inter-firm collaborations. Using event study methodology, this paper tests whether stock market reactions differ when a collaboration formation or termination is announced. In addition, the study provides an in-depth analysis of potential determinants of stock market reactions to collaboration formation announcements. The sample consists of 1037 announcements in German stock markets from 1997 to 2002. The results show that an unexpected termination announcement decreases firm valuation, and a formation announcement increases firm valuation. Further, certain collaborations are more favorable than others, depending on firm industry, age, size, collaboration constellations, and equity versus non-equity investment in partner firm. The results open avenues for further research on partnering strategies.

Effective partnerships in Open Distance Learning: implications of the Irish National Distance Education Centre model

The National Distance Education Centre in Ireland has adopted a cooperative and collaborative approach in meeting its primary aim of extending access to qualifications and training throughout Ireland to those who are unable to attend full-time education because of work, location, disability, or domestic reasons. This paper analyses the conditions which determine the effectiveness of partnerships and networks in the context of this experience. The paper will consider the challenges and opportunities facing cooperative national distance education systems in the context of new technologies, globalisation, and converging markets

Revisiting the strengths and limitations of regulatory contracts in infrastructure industries

This paper evaluates regulation by contract in public-private partnerships (PPPs) in infrastructure services. Although the benefits of competition for the market and of regulatory contracts are widely acknowledged, the literature indentifies several failures in their design. These ‘flaws’ are present in both developed and developing countries and arise in all types of contracts. This study analyses both short and long term contracts, focusing on purely contractual PPPs and institutionalized PPPs (mixed companies). The evidence suggests that for all kinds of contracts, the major problems tend to arise in the preparation of public tender documents: the ‘best’ bidder is not often the winner. The likely results include redistribution in favor of the private partner, weak incentives for high performance, and renegotiation of contracts. Moreover, risks are not allocated correctly nor is effective monitoring ensured. This review of contract procedures and design allows us to draw several implications for policy-makers and to present suggestions and recommendations for improving regulatory contracts.regulation by contract; bidding documents; contract design; risk; monitoring

Water privatisation and restructuring in Latin America, 2007

A detailed survey of developments in water in south America, including the retreat of the multinationals, the development of public sector alternatives, and persistent problems with compensation claims and development bank policies

Doing Business in the Czech Republic

[Excerpt] Baker & McKenzie is one of the world’s largest law firms with its presence in 70 locations in 42 countries. We have been active in the Czech Republic since 1993 and our work includes a full range of legal and tax services directed primarily to foreign investors doing business in the Czech Republic, but also, increasingly, to large, domestic Czech companies, especially as they seek to expand into new markets. Over the past 10 years, the Czech Republic has adopted new laws in virtually every area of regulation in the Czech legal system consistent with European standards as it prepared for accession to the European Union. The Czech Republic formally joined the European Union on May 1, 2004 and its legal system continues to develop in line with European norms. Doing Business in the Czech Republic has been prepared by the Prague office of Baker & McKenzie as a general guide for those companies or persons who wish to engage in business activities or invest in the Czech Republic. The information contained in this publication is general in nature and is intended only to provide an introduction to the Czech legal system and investment climate. This publication may not be relied upon in relation to any transaction or investment decision and it should not be viewed as a substitute for specific legal and tax advice. In addition, readers should be aware that the law and its interpretation are constantly changing in the Czech Republic; as such, the information contained in this publication may quickly become outdated