Prior Alliance Research Articles

A Tale of Two Signals: Partner CSR, CSiR and Alliance Formation

This study examines how a potential partner’s socially responsible performance (CSR) and socially irresponsible performance (CSiR) play distinct signaling roles in influencing the likelihood of alliance formation. We argue that a firm will interpret the positive signal of partner CSR as an indication of partner trustworthiness, increasing its willingness to collaborate. In contrast, the negative signal of partner CSiR will raise a firm’s fear of potential contaminant costs, which motivates it to refrain from alliance formation. We also identify three key boundary conditions that shape the role of partner CSR and partner CSiR. Using alliance and CSR data from U.S. high-tech industries from 1995 to 2016, we find that either a high-CSR or low-CSiR partner has a higher likelihood of alliance formation. Furthermore, when the prior alliance is present or when alliance partners operate in the same industry or location, the relationship between partner CSR and alliance formation is weaker but the relationship between partner CSiR and alliance formation becomes stronger.

The Effect of Litigation Experience on the Scope of R&D Alliances

This paper examines the role of partnering firms’ litigation experience on their proclivity to enter into broad scope R&D alliances. Although prior alliance research proposed factors that will likely influence partnering firms’ preference for engaging in a broad scope alliance, these studies have focused on product market and capability linkages between partnering firms that are likely to intensify competitive concerns, while understudying how partnering firms’ prior experience can generate similar concerns. In this study, we attempt to fill this theoretical gap by unpacking partnering firms’ prior litigation experience as a novel dimension of experience that has been hitherto not considered in alliance research. We suggest that partnering firms’ greater litigation experience will be negatively associated with their choice of a broad scope alliance. Furthermore, we argue that insofar as partnering firms’ litigation experience intensifies competitive concerns and induces them to opt-out a broad scope alliance, such concerns will allay for partners when partners share dyadic experiences such as common technological experience and collaborative experience. Using a sample of R&D alliance agreements in the biopharmaceutical industry we furnish evidence for our theory.

Knowledge Similarity and Structural Integration in Technology Acqusitions

We examine how the similarity between acquiring and target firm knowledge stocks influence the decision to structurally integrate the two firms following a technology acquisition. We find that the relationship between knowledge similarity and the likelihood of structural integration is U-shaped, such that acquiring firms integrate target firms when their knowledge stock has either low or high degree of similarity. When knowledge similarity is low, acquiring firms structurally integrate target firms to extend their knowledge base, whereas when knowledge similarity is high, acquiring firms structurally integrate target firms to deepen their knowledge base. However, such a tendency to structurally integrate a target firm when knowledge similarity is low or high is weaker when the two firms have a prior alliance relationship but stronger when the acquiring firm has greater general acquisition experience. Our findings suggest that the role of post-acquisition structural integration in managing acquired knowledge varies depending on the degree of knowledge similarity between acquiring and target firms.

Alliance performance and subsequent make‐or‐ally choices: Evidence from the aircraft manufacturing industry

AbstractResearch SummaryWe examine how the performance of a firm's prior alliances influences its propensity to persist with the alliance mode or switch to independent operations in the context of new product introductions (NPIs). Drawing on the behavioral theory of the firm (BTOF), we argue that a firm's alliance performance has a U‐shaped effect on its likelihood of undertaking the subsequent NPI independently and that competitive intensity strengthens this U‐shaped relationship. We also predict that firms with above‐aspiration alliance performance are more likely to achieve breakthrough performance in the subsequent NPI if they switch to independence than if they continue to ally. Data on NPIs in the global aircraft manufacturing industry (1944–2000) support our hypotheses. Our study extends the alliance literature and contributes to research on how firm performance influences subsequent strategic choices.Managerial SummaryThe dilemma of whether to continue or exit an alliance or relationship is a common one for individuals, countries, and firms. Our study examines firms' strategic decision to switch to independent operations after having partnered with other firms. Using the aircraft product development context, we show that firms that make such a change in their strategy are the ones that performed either much better or much worse than what they expected. Firms with alliance performance close to their expectations tend to persist with their current strategy. Of the firms that change their strategy, the high performers benefit much more from changing their strategy than low performers. We provide insights regarding when it is preferable for managers to continue to ally or to switch to independence, especially in launching new products.

National depth and R&D alliance portfolio international expansion: The moderation of technological discontinuity and long-term orientation

Numerous studies have reported the positive outcomes of an expanded international R&D alliance portfolio, yet very few investigate what drives its international expansion. This study fills the gap by developing a three-dimensional frame that demonstrates the national depth of prior alliance portfolio (ND), technological discontinuity (TD), and long-term orientation (LTO) to understand antecedents further. First, this study examines the role of ND by illustrating its trust mechanism derived from transaction cost economies and the learning mechanism based on organizational learning theory. Second, it investigates TD'S moderation role by explaining how it mitigates trust and learning mechanisms of ND from the resource-based view. Third, it explores LTO's three-way moderation role by elaborating on how it impacts decision-making. It develops novel quantitative measures and conducts empirical analysis using multi-source matching data of 106 firms spanning 11 years (2006−2016). Results show that national depth negatively impacts R&D alliance portfolio international expansion. High technological discontinuity weakens the negative impacting strength of national depth. High long-term orientation weakens the moderation strength of technological discontinuity.

Functional diversity of alliance portfolio and corporate social responsibility

This paper seeks to bridge them by exploring the impact of a firm’s alliance portfolio on its CSR. Drawing from the organizational learning lens, we propose that alliance portfolio represents an important source of knowledge and insights that are necessary for a firm to adopt and implement various CSR practices. As the functional diversity of a firm’s alliance portfolio increases, it can gain more distinctive CSR-related knowledge, and its CSR performance will reasonably increase. Further, we propose that the learning from alliance portfolio demonstrates an incremental nature and is contingent upon the governance structure of a firm’s alliances. The empirical findings in the sample of 521 public firms in China strongly support the positive linkage between functional diversity of alliance portfolio and CSR. The findings also reveal that this relationship weakens for firms with more prior alliances and a higher reputation – two variables we employ to indicate the incremental effects of learning from alliance portfolio. And the relationship becomes stronger as a firm’s portfolio includes more equity-based alliances.

Determinants of alliance productivity and performance: evidence from the automobile industry

PurposeThis study aims to identify critical factors and examine their impact on alliance performance from an organizational learning point of view.Design/methodology/approachA modified total interpretive structural modeling (M-TISM) methodology was used in this study. The different paths/links in the developed M-TISM model were further validated by using the Mahindra-Ford alliance case study.FindingsIn this study, a total of seven critical factors were identified using an extensive literature review, and a hierarchical model was developed. Results show that prior alliance experience, inter-partner learning, knowledge transfer, absorptive capacity and knowledge internalization have a positive on the alliance productivity and performance. Furthermore, the findings indicate that prior alliance experience remains essential for alliance productivity and performance, while knowledge transfer and absorptive capacity can contribute to inter-partner learning and knowledge internalization in strategic alliances.Research limitations/implicationsThis study can help managers and policymakers to understand the identified critical factors from an organizational learning perspective and understand their impact on the alliance performance in a competitive environment. The managers should know that previous alliance experience, learning from partner firms, building an absorptive capacity, etc., are necessary to achieve superior alliance productivity and performance. For academicians, the M-TISM methodology used in this study can provide a mechanism to perform exploratory research and build a hierarchical model in different management research fields.Originality/valueThe study fills research gaps by identifying key factors, developing a hierarchical model, and examining their impact on the performance of strategic alliances in the Indian automotive industry.

Does the working alliance mediate the therapist competence-outcome relationship in cognitive behavior therapy for depression?

Objective: This study examined whether the working alliance mediated the effect of therapist competence on subsequent depression symptomology during Cognitive Behavioral Therapy (CBT). We also tested the potential moderation effect of alliance on subsequent depressive symptomology, based on participants’ cognitive aptitude. Method: A total of 86 sessions were coded as the prediction interval across 50 patient-therapist dyads (age M = 39.22, SD = 8.78; 76% female). While accounting for prior depression, competence, and alliance levels, predictors were assessed early treatment (session 1; n = 45 sessions), mid-treatment (session 12; n = 41 sessions), and depressive symptomology was assessed at the subsequent session to the predictor assessments to investigate within-session variability of process variables. Results: Mediation analysis revealed that the effect of early treatment therapist competence on symptom change was mediated by alliance (indirect effect: β = −.17, 95% percentile bootstrap CI [−.32, −.01]). The positive association involving early treatment alliance and next session outcome was conditional upon low cognitive aptitude levels. Conclusions: Our result offers preliminary support for alliance as a mediator of the effect of competence, and that alliance-outcome relations vary as a function of client aptitude. These novel findings require replication and extension.

Alliance Dynamics in the Shadow of Shifting Power

Abstract Alliances are costly to form and to terminate, and yet alliances change frequently. Scholars typically attribute these decisions to static factors, such as the power balance, and retrospective ones, such as past power shifts. We highlight another factor: prospective changes, particularly anticipated military strength shifts. We analyze a three-country bargaining model of alliances and war that incorporates forward-looking power dynamics. The model, unlike those restricting players to set roles, flexibly allows players to ally in any arrangement. We find that alliance arrangements that are optimal when power is static are often suboptimal when power fluctuates. Maintaining prior alliances despite expected power shifts may even lead to preventive war. States thus strategically look to the future to identify optimal alliances in the present. Quantitative analyses corroborate the expectation. As the anticipated size of power shifts increases, alliance changes become more common. Accordingly, states navigate expected changes in the international landscape by rearranging current alliance commitments that can help minimize the risk of conflict. When power balances are in flux, malleable institutional arrangements may prove preferable to rigid ones.

Market uncertainty, innovation of firms in alliance and alliance partner characteristics

PurposeWhile prior alliance literature has focused on how firms exploit alliance strategies to enhance performance and innovation, little is known about whether market uncertainty increases, decreases or has no effect on innovation outcomes of firms involved in alliances, and under what conditions these firms promote innovation in an uncertain market through alliances. Relatedly, innovation research has examined the impact of environmental uncertainty on innovation; however, this line of research does not answer the question in the alliance context.Design/methodology/approachUsing data of firms engaged in alliances in the US pharmaceutical and biotechnical industries between 1990 and 2015, the authors examine firms' alliance partner characteristics and innovation outputs in terms of innovation quantity and exploratory innovation.FindingsWe find that market uncertainty hampers innovation quantity and exploratory innovation of firms involved in alliances, because in this environment, relational risks and coordination challenges outweigh the benefits of knowledge sharing from partners. However, the authors find that alliance partners' characteristics such as a different industry and different country origins mitigate the negative effect of market uncertainty on these firms' innovation by offering new business opportunities and enhancing their learning capability.Originality/valueThis study contributes to the alliance literature by addressing a significant question of whether and how market uncertainty matters in the innovation output of firms involved in alliances and how these firms address the environmental challenges and promote innovation. The study also contributes to innovation research by delineating the nature of market uncertainty and its impact on innovation in an alliance context.

Value Drivers from Prior Alliances with Targets in Mergers and Acquisitions

Acquisitions are often associated with insipid performance returns for the acquirer for many reasons, the most prominent of which is information asymmetry. Prior alliances with the target firm can attenuate losses from asymmetric information and yield higher returns for the acquirer. Using learning, network, and property rights theories, we study acquisitions of alliance targets and calibrate the extent of value enhancement as a function of three sets of moderating factors – alliance-, network-, and market. Alliance-level factors include quantity, duration, and diversity. Network-level factors include network centrality, efficiency, and reputation. Market-level factors include demand uncertainty, competition, and technology intensity. Analysis of 1,499 acquisitions that occurred between 1990 and 2015 indicates that while alliance partner acquisitions are associated with higher stock returns for the acquiring firm, the aforementioned moderators affect the extent of returns. We find evidence of non-linear returns from alliance-level moderators, quantity and duration, and positive returns from market-level moderators. Some of the network-level benefits accrue at the time of the alliance announcement itself, leaving little residual value gains at the time of the acquisition. Our study contributes to a richer understanding of the drivers of value from prior alliances with the acquisition target.

Inventor Commingling and Innovation in Technology Startup Mergers & Acquisitions

How does knowledge recombination via inventor “commingling” in technology startup acquisitions relate to innovation outcomes? Commingled teams have inventors from the acquiring and acquired firms, and reflect collaboration benefits and costs of integrating human resources across organizational boundaries. The benefits to such team design are “unsticking” knowledge and introducing variety to the possible knowledge to be recombined, while the costs include disrupted team standard operating procedures and routines and the need for enhanced coordination. In addition, innovation efficacy of commingled teams may also depend on the form of inter-organizational R&D cooperation, ranging from less integrated (strategic alliances) to more integrated (M&As) structures. We argue that the control and authority associated with integrated structures aids innovation. We assemble a large panel dataset of technology startups which eventually experienced a merger, some of which also had a prior alliance with the acquirer. Using a difference-in-differences design, we find that innovation quantity, quality, and exploration all increase post-merger for firms with higher rates of inventor commingling. Since commingling can be endogenous to the cost of inventor collaboration, we exploit exogenous introductions of direct flights between the acquired and acquiring firms to instrument for commingling, and find robust results. Inventor-level commingling is also more effective under integrated collaboration structures.

In CEOs we trust: When religion matters in cross-border acquisitions. The case of a multifaith country

This paper examines the emergence of trust by multifaith target-firm personnel in foreign acquirer CEOs during early post-acquisition integration, a decisive period for acquisition success, yet considerably under-researched. Combining self-categorization and similarity-attraction theories, we argue that religious similarity with the foreign acquirer’s CEO represents shared values to the personnel, from which trust in the CEO arises. Further, we scrutinize the moderating effects of the personnel’s religiosity and prior alliance success between the acquirer and target firm. We test our model using field-experimental data from 411 multifaith Malaysian personnel. The findings show that personnel-leader trust occurs more readily with religious similarity than religious dissimilarity, and that the personnel’s religiosity strengthens this relationship. However, a successful prior alliance does not weaken the religious similarity–trust relationship. Our research encourages acquisition managers to consider religion, a factor beyond the traditional acquisition playbook, as a trust antecedent during early post-acquisition integration.

Salient Expectations? Incongruence across Capability and Integrity Signals and Investor Reactions to Organizational Misconduct

Research in signaling theory has recently begun to explore how audiences process signal sets and the incongruence across the signals within. However, prior studies have assumed homogenous compositions of signal sets, and thus unidimensional signal incongruence, although social evaluations tend to involve simultaneous processing of different dimensions. In this study, we examine audiences’ responses to the interdimensional incongruence between capability and integrity signals, particularly by focusing on how the salience of positive capability signals aggravates investor reactions to organizational misconduct, a negative integrity signal. Using irregular financial restatements as the negative integrity signals and prior alliance announcements as the positive capability signals, we find that investors react more negatively to restatements by firms whose alliance announcements are more salient—that is, the firms that announce more frequently and firms that create more positive expectations from those announcements. We also find that firm size and level of diversification weaken these negative effects. We contribute to research on signaling theory, social evaluations, organizational misconduct, and alliances.

Depth and breadth of knowledge and the governance of technology alliances

Abstract This paper focuses on technology alliances between R&D intensive biotechnology firms and larger pharmaceutical companies. It aims to investigate whether the biotech partners can leverage the depth and the breadth of their knowledge resources to retain their equity ownership when forming an alliance, and whether prior alliance experience adds to their overall leverage. Using a sample of 390 alliances formed between US biotechnology and pharmaceutical companies, we find that biotech firms with deeper technological resources are more likely to retain their equity ownership, and that this relationship is stronger when the biotech firm has more alliance experience.

Safeguarding from the Sharks: Board Representation in Minority Equity Partnerships

We study minority equity partnerships and the representation of investing firms on the boards of directors of their partners. In such alliances, an investor firm owns a minority position in the investee partner and may or may not secure a board seat. Prior alliance governance research has largely focused on the choice between equity and nonequity forms of alliances, and it has paid little attention to the particular administrative features of these organizational forms, notably their governing boards. We extend corporate governance research that has emphasized the monitoring and advisory roles of boards by examining how an investee's concerns about knowledge misappropriation can reduce the likelihood that an investor obtains board representation. We suggest that, although there exist opportunities for an investee to benefit from the investor’s advice, the investor's ability to use an investee's knowledge by itself and indirectly with the help of its other partners negatively affects the likelihood of a board seat for the investor. We further argue that this negative effect is amplified when the investee has particularly valuable technologies at risk of appropriation by the investor. Our evidence from minority equity partnerships in the biopharmaceutical industry indicates why and when investors do not obtain board seats, despite the monitoring and advisory benefits that directors can bring to cooperative commercialization agreements.

Alliance Announcement “Surprise” and the Impact on Firm Valuation

This submission is sourced from a dissertation that was successfully defended in November 2018. This study integrated research on strategic alliance formation activity and market signals to examine the impact of alliance announcement history and alliance announcement surprise on firm performance consequences, and then explored the affect of a moderator \on the prior alliance announcement/firm performance consequences and the alliance announcement surprise/firm performance consequences relationships. The focus is on non-equity alliances that involve marketing, product development, research, technology transfer, and licensing agreements. The non-equity alliance is the preferred mode of collaboration because it provides a quick way to markets, resources, and capabilities (Kwicinski, 2017), although it lacks the control aspect of ownership found in an equity alliance (Globerman & Nielsen, 2007; Gudergan, 2002; Gulati, 1995). The research model revealed that abnormal returns, for firms making announcements with no alliance announcement history, were roughly 3x higher in magnitude than the abnormal returns for firms with alliance announcement history. Moreover, abnormal returns for firms that disclosed less than three announcements within a calendar year were 2x to 3x higher than abnormal returns for firms that disclosed three or more announcements within a calendar year. Finally, the combined contributions relating to alliance announcement surprise and prior alliance announcement history offer an interesting new perspective to the alliance formation literature: the notion of alliance announcement cadence.

Cohabitation before marriage: do prior alliances enhance post-merger performance?

We investigate the impact of prior alliance relationships on subsequent mergers between partner firms. We argue that an acquirer’s prior alliance experience with the target reduces information asymmetry, which helps improve acquisition performance. Alternatively, agency problems arising from familiarity may lead to inefficient decision making. Examining mergers between 1986 and 2014, we find evidence that prior alliance collaboration is positively associated with the acquirer’s long-term profitability and growth. This positive effect is more pronounced when target-specific learning and experience are more crucial to merger success, such as targets in knowledge-intensive or organizational-capital-intensive industries as well as cross-industry mergers. However, we cannot formally rule out the possibility that our results are partly driven by the small size of our sample.

ALLIANCE EXPERIENCE, INDUSTRY CONDITIONS, AND EXTERNAL TECHNOLOGY COMMERCIALISATION

External technology commercialization (ETC) is one strategy firms use in order to appropriate value from innovation. In view of the complexities associated with managing partner relationships, firms are likely to draw on their prior alliance experience when considering ETC strategies. Applying an organisational capabilities perspective, we investigate the extent to which prior alliance experience shapes a firm’s propensity to engage in external commercialisation. Because the motivations and risks of ETC vary across industries, we further consider how industry effects may influence this relationship. Our study examines the ETC initiatives of 1,642 firms in the US manufacturing sector between 1990 and 2006. The results suggest a curvilinear relationship between alliance experience and ETC. We also find that this relationship is moderated by the nature of the industry appropriability regime, rate of technological change, and competitive intensity.

The Decision to Stay or Resign Following an Acquisition by a Chinese or Indian Company

This paper analyses the challenges created by the liability of foreignness and the associated country-of-origin bias and their effect on Western managers’ decisions about whether to leave following their company’s acquisition by an emerging-economy multinational. Using a manipulated scenario-based survey conducted with American, French and German managers, the results show that managers are more likely to resign if their company is acquired by a company from an emerging economy (specifically, China or India) than by a company from their home or another Western, developed country. Furthermore, the results do not support previous research findings that show the role of prior alliance between the acquirer and its target, previous experience with successful acquisitions, previous experience with the local market and minimal post-acquisition integration to be forces helping to counterbalance the adverse effects of the liability of foreignness, country-of-origin bias and the ‘emergingness’ nature of foreign acquirers.