When Do Strategic Alliances Create Shareholder Value?

This article reports the findings of the authors' study of the stock market reaction to 345 strategic alliances announced during the period 1983‐1992. The study reports statistically significant gains that, when translated into dollars, are divided roughly evenly between the larger and smaller partners (though the smaller partners experience larger percentage gains). Moreover, the value gains are largest in those cases in which two high‐tech firms ally to develop or apply new technology, while the market shows less enthusiasm for non‐technical or marketing alliances. The underlying rationale for strategic alliances is that each partner contributes its expertise to the relationship and gains access to some special resource or competence that it lacks—but without incurring the costs associated with creating a larger organization through a merger or joint venture. Consistent with this argument, the authors report that alliances are relatively long‐lasting, and are not preludes to merger or formal creation of joint venture entities.