Vertical vs. Horizontal: How Strategic Alliance Type Influence Firm Performance?

Baojun Yu,Hangjun Xu,Feng Dong

doi:10.3390/su11236594

Abstract

Strategic alliances have become a key focus in the management and marketing literature. However, much of the previous research in this area has focused on the antecedents and accounting effects of strategic alliances. There is an opportunity to more closely examine how alliance types might influence the public equity markets. As a result, this study summarizes the literature for the theoretical foundation of strategic alliances to increase the understanding of the two main types of strategic alliances, that is industry scope (vertical vs. horizontal alliances) and size scope (asymmetric vs. symmetric alliances). Then, this study proposes a conceptual framework to examine the main and relative effects between different types of strategic alliances and firm performance. Using the Bloomberg Mergers and Acquisitions (M&A) database from 1 January 2010 to 1 January 2016, we find that vertical symmetric alliances gain more abnormal returns than others. Finally, implications and limitations are also discussed.

Highlights

Over the last two decades, the merger and acquisition (M&A) and strategic alliance research have gained increasing popularity
To fill this research gap, this study summarizes the literature for the theoretical foundation of strategic alliances to increase the understanding of two main types of strategic alliances, that is industry scope and size scope
We found that the cumulative abnormal return for vertical alliances from day −5 to day −1 (2.6%) was significantly bigger than horizontal alliances (−1.0%) and we found that same pattern for the abnormal return on event days −5 and +5 (4.4% > −2.3%)

Summary

Introduction

Over the last two decades, the merger and acquisition (M&A) and strategic alliance research have gained increasing popularity. Strategic alliances are often viewed as a key strategic resource and much research has found that the announcement of a strategic alliance can positively relate to firm abnormal returns [8,9,10], limited research has offered a complementary explanation for how different perspectives of alliance announcement types affect the stock market’s evaluation, especially alliances with a firm’s rivals or asymmetrical partners It is an imperative question for both scholars and practitioners: traditionally, alliances have been conceived of as ad hoc arrangements serving specific needs—is it worth engaging extensively in multiple simultaneous alliances to gain more competitive advantages?. Using the Bloomberg M&A database from 1 January 2010 to 1 January 2016, we find that vertical symmetric alliances gain more abnormal returns than others

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Methods

Conclusion