Abstract
In this paper, we investigate the impact of both alliances and major customer relationships on operating risk, operating performance, and market returns. We examine the performance of 291 high-tech manufacturing firms that reported major customer relationships in accordance with FAS 14 (superseded by FAS 131 in 1997) and a subset of 128 firms that were also engaged in major alliance activity (research or marketing) over the period 1990 to 2002. Although managers suggest that major reasons to enter into partnerships or alliances are to reduce operating risk and increase performance, our paper is the first (to our knowledge) to examine directly this conjecture. Using a control group experimental design, we examine the performance impact of partnering relationships, and we find that impact often to be opposite managers' expectations. We employ several proxies for operating risk and find that risk generally increased during major customer relationships and research alliances. Operating performance decreases during research alliances as well as after major customer relationships. Finally, we find that the market penalizes firms that discontinue major customer relationship but rewards firms participating in research alliances.
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