Global strategic alliances: Short-term effects on shareholders' wealth

Panayiotis Kefalas, Pace University

Abstract

This study defines Global Strategic Alliances (GSAs) in the context of current management and international business literature, and proceeds to investigate, in relation to shareholders of the participating firms, possible valuation effects that arise from the formation of such alliances. A GSA is defined as a cooperative arrangement between two or more global firms that can affect the competitive positioning of either participant in the market segment in which they set out to compete. The main thesis of this study is that GSAs are value creating activities for the shareholders of all participating firms; and in addition, the pattern of wealth gains is independent of the participating firms' countries of origin. To further investigate valuation effects, three previously untested hypotheses are included here: (i) the extent of wealth gains of firms entering GSAs is positively related to the size of the business segment the alliance will affect, (ii) wealth gains are higher on average for firms that have control over the alliance, and (iii) in a GSA designated to be equally supported by the partners, the dollar values of their wealth gains are approximately equal. The main hypothesis, which has been proven is that all firms in general exhibit positive wealth gains; furthermore, no country effect is observed in the distribution of these gains. Larger wealth gains are found to be associated with firms whose GSA affected a large business segment, while positive wealth gains are associated with equal control GSAs, with larger gains for minority partners and no effect for majority firms. A country effect is observed in the distribution of dollar gains among equal partners: the gains of non-US firms tripled those of the US partner firms. The managerial implications of these findings are that the marketplace responds favorably to cooperative activity and favors a 50-50 arrangement over other alternatives. Since it appears that US firms are not gaining as much as their foreign-based partners, US firms should reconsider their objectives and competence before entering into an alliance. (Abstract shortened by UMI.)

Subject Area

Management|Finance

Recommended Citation

Kefalas, Panayiotis, "Global strategic alliances: Short-term effects on shareholders' wealth" (1994). ETD Collection for Pace University. AAI9422011.
https://digitalcommons.pace.edu/dissertations/AAI9422011

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