The Effects of Alliance on Foreign IPO Firms’ Survivability in the United States

Abstract

The purpose of this paper is to understand how foreign firms’ alliances and the characteristics of those alliances (ties to a host country and alliance portfolio diversity) influence firms’ survivability. Using data from 162 foreign firms that made IPOs in the U.S. financial market between 2000 and 2008, this study investigates how number of alliances, alliances with US firms, and alliance portfolio diversity post-IPO influenced the foreign the firms’ long-term survivability. Relying on the resource-based view, we hypothesized that number of alliances and alliances with US firms would have positive impact on survivability and that alliance portfolio diversity would have an inverse U-shaped relationship with survivability. The study finds that a greater number of alliances post-IPO has a positive impact on firm survivability, but ties with US firms do not have significant effect. Contrary to our expectation, the relationship between alliance portfolio diversity and survivability is U-shaped (not inverted). A moderately diverse alliance portfolio diminishes a firm’s survivability, but a high level of alliance portfolio diversity has a positive impact on the firm’s survivability. To the best of our knowledge, this is the first study to investigate the relationship between the alliances of foreign firms and survivability post-IPO. This study sheds new light on the implications of alliance building by foreign firms.