Date of Award

August 2013

Degree Type

Dissertation

Degree Name

Doctor of Philosophy

Department

Business Administration

First Advisor

Edward Levitas

Committee Members

Satish Nambisan, Sali Li, Sarah Freeman, Romila Singh

Keywords

Alliance Partner Selection, Market Reaction, Strategic Alliances

Abstract

ABSTRACT ESSAY 1

RAPID OVER-REACTION: PERCEIVED VALUE CREATION VIA ALLIANCE ANNOUNCEMENTS

The management literature has widely acknowledged the importance of studying and understanding the determinants of the market's reactions to the announcements of strategic alliances. With a focus on dyadic alliances, I ask what types of information signaled to the market by the alliance announcement influence the investors' perception of value. I hypothesize that the type of technical expertise, relationship expertise, and market expertise of each alliance partner, expressed as either explorative or exploitative, sends decodable signals to the investors, which in turn influences their reaction to the new alliance announcement. Using a sample of 927 alliances extracted from a unique biopharmaceutical dataset, I proxied investors' reaction to the alliance announcements by calculating the cumulative abnormal return during a three-day window around the alliance announcement. I found that while technical expertise does not appear to be a signal that investors consider when valuing firms involved in a new alliance, both relationship expertise and market expertise showed a statistically significant influence on the investors' perception of value.

ABSTRACT ESSAY 2:

REDUCING INVESTOR ANXIETY VIA ALLIANCE PARTNER SELECTION

The management literature has recognized strategic alliances as an organizational form that has the potential to reduce uncertainty. One important step for alliances in order to achieve a reduction in uncertainty is selecting the right partner, one that enables the alliance to effectively address the specific type of uncertainty it faces. In this study, I specifically address the question of whether the perceived uncertainty of investors at the time of the alliance announcement is influenced by whether the skills and expertise of the two alliance partners are similar or complementary (diverse). I suggest that the level of technical expertise, expressed as either explorative or exploitative and interpreted as either similar or complementary, sends a signal to the investors, which in turn will impact their perception of uncertainty. In addition, I study whether this relationship is moderated by the level of exogenous uncertainty faced by the alliance. Using a sample of 927 alliances extracted from a unique biopharmaceutical dataset, I found that exogenous uncertainty in fact moderates the relationship between partner similarity/ complementarity and investors' perception of uncertainty.

ABSTRACT ESSAY 3:

SPILLOVER EFFECTS IN ALLIANCE RELATIONSHIPS

Entering multiple simultaneous alliances is a common practice, especially in R&D intense industries. While this strategy may enhance the possibility of success by attempting to simultaneously unlock possible synergistic effects in multiple alliances, it also exposes the alliance partners to spillover effects created by their partners' alliances. In this study I will examine how one specific action of one partner, to enter a new alliance, affects the initial alliance partner. Specifically, given that firm A and firm B are in an existing alliance, how will the market react to the information that firm A has entered into a new alliance with firm C, and how will the market reaction affect firm B (the initial alliance partner)? I develop and test two sets of competing hypotheses using a unique biopharmaceutical dataset and find that the market reacts favorably to the new alliance as measured by the change in value of firm B's stock price. My goal is to contribute to the literature by testing how the signals sent by the alliance to the market affect the initial alliance partner and thus if investors monitor and react to post-alliance events.

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