Strategic alliance announcements and new venture stock market returns: signaling and resource-based perspectives on the effects of partner firm, new venture firm, and alliance characteristics
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Firms form marketing and technology alliances to access other firms’ resources, and these alliances act as signals to investors. Investors use these signals to adjust expectations about new venture performance prospects, but our understanding of investor responses is incomplete because limited research examines them as a function of factors other than the alliance announcements. To better understand alliances as signals, we must incorporate factors influencing the resources alliances make available. Thus, my research question is as follows: To what extent do partner firm, focal firm, and alliance characteristics provide signals to investors about the resources alliances make accessible? My theory integrates signaling theory and resource-based theory on strategic alliances, and an event study is used to analyze investor responses to alliances formed by high technology new ventures recently having undergone initial public offerings. The findings provide evidence both in support and in contradiction to signaling theory and resource-based theory on strategic alliances. For example, signaling theory logic suggests both that the visibility and prestige of large partners and that the uncertainty associated with small and young firms enhance the strength of signals associated with alliance announcements. In this study, there is no support for the former hypotheses and limited support for the latter. Moreover, although both perspectives suggest that the new venture’s alliance experience increases investor responses, such effects were not found. There was some evidence to support the signaling theory argument that signal consistency strengthens responses. Specifically, investors respond favorably to marketing alliances when the new ventures’ alliance partners have strong commercial resources (many new products per year). There is also evidence that investors respond to the possibility of resource complementarity, contingent on which firm has the resources that complement the alliance. For instance, investors value marketing alliances when new ventures have strong R&D resources. In technology alliances, investors may respond more favorably when new ventures have strong commercial resources (high advertising intensity), but may respond negatively when partners have such resources. In sum, this study provides some support for signaling theory and resource-based theory on strategic alliances, but also provides null results that are inconsistent with either.
Holmes Jr, Robert Michael (2008). Strategic alliance announcements and new venture stock market returns: signaling and resource-based perspectives on the effects of partner firm, new venture firm, and alliance characteristics. Doctoral dissertation, Texas A&M University. Available electronically from