Arms race or détente? How interfirm alliance announcements change the stock market valuation of rivals

M ost prior event studies find that the announcement of a new alliance is accompanied by a positive stock market response for the partners. This result has usually been interpreted as evidence for the prevailing view that alliances are effective vehicles for partners to acquire or access new skills and thus become stronger competitors. However, partners should also earn positive abnormal returns if alliances are used to shape competitive interactions, attenuating competitive intensity industry-wide. In this study, we disentangle these different mechanisms by examining how alliance announcements affect the stock market's evaluation of allying firms' rivals: if an alliance is expected to make partner firms more competitive, this should lead to negative abnormal returns for partners' rivals; if an alliance is expected to facilitate a reduction in competitive intensity, this should lead to positive abnormal returns for rivals. Results from an event study analysis of research and development alliances in the telecommunications and electronics industries during 1996-2004 provide evidence consistent with competition attenuation in some alliances. Our research thus challenges the increasingly narrow focus on learning and resource accumulation through alliances, and calls for broader consideration of the roles and effects of collaboration, both for individual firms and for industry structure

Organizational choice in R&D alliances: Knowledge-based and transaction cost perspectives

This study examines how firms choose organizational form for their R&D alliances. Encouraging cooperation in these alliances is often challenging, given the difficulties in knowledge sharing between partners and protecting the property rights over partner knowledge. Interestingly, knowledge-based and transaction cost perspectives generate different hypotheses on alliance organization choice in this setting. When partner knowledge bases are very different, the risk of unintended transfer or leakage is reduced, yet the need for enhanced communication and knowledge sharing mechanisms remains undiminished. With a sample of 232 R&D alliances, I find more thorough support for the transaction cost hypothesis. Firms more likely select an equity joint venture as partner knowledge bases diverge and knowledge transfer becomes more difficult. When such knowledge bases are very different, however, firms are less likely to choose an equity joint venture over more contractual forms of alliance organization. Thus, these results provide empirical evidence on alliance organization choice and also have important implications for the fundamental question of why firms exist. Copyright © 2004 John Wiley & Sons, Ltd.

The scope and governance of international R&D alliances

Participants in research and development alliances face a difficult challenge: how to maintain sufficiently open knowledge exchange to achieve alliance objectives while controlling knowledge flows to avoid unintended leakage of valuable technology. Prior research suggests that choosing an appropriate organizational form or governance structure is an important mechanism in achieving a balance between these potentially competing concerns. This does not exhaust the set of possible mechanisms available to alliance partners, however. In this paper we explore an alternative response to hazards of R&D cooperation: reduction of the ‘scope’ of the alliance. We argue that when partner firms are direct competitors in end product or strategic resource markets even ‘protective’ governance structures such as equity joint ventures may provide insufficient protection to induce extensive knowledge sharing among alliance participants. Rather than abandoning potential gains from cooperation altogether in these circumstances, partners choose to limit the scope of alliance activities to those that can be successfully completed with limited (and carefully regulated) knowledge sharing. Our arguments are supported by empirical analysis of a sample of international R&D alliances involving electronics and telecommunications equipment companies. Copyright © 2004 John Wiley & Sons, Ltd.Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/34617/1/391_ftp.pd

The role of lawyers in strategic alliances (tape 1 of 3)

Symposium explores how lawyers can bargain effectively without impairing trust and devise contract terms that will enhance trust and cooperation to maximize the profitability of alliances. --program flyer. Introduction by Gerald Korngold, Dean of the School of Law; moderated by Professor George W. Dent, Jr.; Steven Fraidin and Rachelle C. Sampson, speakers; commentators Daniel F. Austin, Edward Bernstein, Jeanne M. Rickert, Hewitt B. Shaw, Jr., and Wendy C. Shiba Strategic alliances and corporate control / Stephen Fraidin -- Alliance structure: selection and consequences / Rachelle C. Sampson -- Negotiating and drafting for strategic alliances / George W. Dent, J

The role of lawyers in strategic alliances (tape 1 of 3)

Symposium explores how lawyers can bargain effectively without impairing trust and devise contract terms that will enhance trust and cooperation to maximize the profitability of alliances. --program flyer. Introduction by Gerald Korngold, Dean of the School of Law; moderated by Professor George W. Dent, Jr.; Steven Fraidin and Rachelle C. Sampson, speakers; commentators Daniel F. Austin, Edward Bernstein, Jeanne M. Rickert, Hewitt B. Shaw, Jr., and Wendy C. Shiba Strategic alliances and corporate control / Stephen Fraidin -- Alliance structure: selection and consequences / Rachelle C. Sampson -- Negotiating and drafting for strategic alliances / George W. Dent, J

The role of lawyers in strategic alliances (tape 2 of 3)

Symposium explores how lawyers can bargain effectively without impairing trust and devise contract terms that will enhance trust and cooperation to maximize the profitability of alliances. --program flyer. Introduction by Gerald Korngold, Dean of the School of Law; moderated by Professor George W. Dent, Jr.; Steven Fraidin and Rachelle C. Sampson, speakers; commentators Daniel F. Austin, Edward Bernstein, Jeanne M. Rickert, Hewitt B. Shaw, Jr., and Wendy C. Shiba Strategic alliances and corporate control / Stephen Fraidin -- Alliance structure: selection and consequences / Rachelle C. Sampson -- Negotiating and drafting for strategic alliances / George W. Dent, J