Title: The Wealth Effect of Strategic Alliances in Taiwan's High-Tech Electronics Industry
Abstract: This article investigates share price responses to strategic alliances in Taiwan's high-tech industry from 1996 to 1999. Taiwan's high-tech industry plays an important role'on the international stage, but there is nothing in the literature studying the impact of strategic alliances on Taiwan's high-tech industrv. This study can fill the gap. Our empirical findings show that the wealth effect for a strategic alliance is positive, with no evidence of wealth transfer between alliance partners. In addition, same-industry alliances show significantly higher abnormal returns than different-industry alliances; equity alliances and non-equity alliances both have significantly positive abnormal returns; and Taiwanese firms have significantly positive abnormal returns versus foreign firms in global alliances. Our empirical findings are consistent with the argument that the organizational flexibility offered by alliances is valuable to the island's high-tech industry which needs to cope with a fast-changing environment. Introduction A strategic alliance is a planned relationship in which two or more independent firms share common goals and pursue a common benefit, but their operations are kept highly independent of each other (Mhor and Spekman, 1994). The principle behind a strategic alliance is that each partner contributes its own expertise to the relationship and gains access to some special resources or competence that it lacks. This enables a firm to focus on its core skills or competencies while acquiring some special resources that it lacks from the partnering firms, but it will not produce some costs that incur from a merger or a joint venture. A strategic alliance can also create value for each partner by way of the organizational flexibility it offers and it also can be broken up soon when the market demands a change. Firms form alliances under a variety of intents. The common purposes of strategic alliances include obtaining comparative advantages, acquiring new technologies, entering a new market in new areas or countries, sharing or reducing risk, establishing economies of scale in research or production, giving firms a better ability to provide more products and services, accessing complementary resources and technologies, and helping the firm to adapt to keen competition and a fast-changing environment (Bleeke and Ernst, 1991; Contractor and Lorange, 1988; Harrigan, 1986; Mohr and Spekman, 1994; Porter and Fuller, 1986; Shan, 1990). Strategic alliances can be classified into joint ventures, non-equity alliances, and minority-equity alliances in a broad sense. Among these three cooperative modes, only joint ventures involve establishing a formal entity. This study focuses on non-equity and minority-equity alliances. A minority-equity alliance allows partners to share equity control, while in a non-equity alliance the partners neither share equity control as in a minority-equity investment nor create a new organizational entity as in a joint venture. Rather, they simply agree to pool resources. Our objective is to examine whether strategic alliances create value for the shareholders of the partnering firms in Taiwan high-tech industry. In addition, we separate the alliances into different classifications in order to determine the valuation consequences across different kinds of alliances. Even though Taiwan's high-tech industry plays an important role in the world,1 there is actually no literature studying the impact of strategic alliances on Taiwan's high-tech industry. Our study attempts to fill the gap. Moreover, previous studies of strategic alliances have examined the effects of joint ventures, whereas only a few empirical studies have addressed the issue of non-equity alliances and minority-equity alliances. This paper investigates both non-equity alliances and minority-equity alliances, allowing us to be able to understand the wealth effects of strategic alliances more directly and completely. …
Publication Year: 2004
Publication Date: 2004-09-01
Language: en
Type: article
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Cited By Count: 4
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