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The effect of code-sharing alliance formations and terminations on firm value: The role of co-specialization and scope extension

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  • Wassmer, Ulrich
  • Meschi, Pierre-Xavier

Abstract

This paper examines how alliance co-specialization and scope extension affect firm value at the time of alliance formation and termination, and whether value creation upon alliance formation also explains value creation upon termination. Building on the relational view of the firm, we develop predictions that are tested using event study methodology and data on code-sharing alliances formed, extended, and terminated between 1994 and 2008. The findings suggest that from a stock market perspective alliance formation and termination can be seen as two interrelated events and that it is difficult to reverse initial valuations past the alliance formation phase. They also suggest that the stock market reacts to alliance formation more critically than to post-formation decisions such as alliance scope extensions and terminations.

Suggested Citation

  • Wassmer, Ulrich & Meschi, Pierre-Xavier, 2011. "The effect of code-sharing alliance formations and terminations on firm value: The role of co-specialization and scope extension," Journal of Air Transport Management, Elsevier, vol. 17(5), pages 305-308.
    • Handle: RePEc:eee:jaitra:v:17:y:2011:i:5:p:305-308
    DOI: 10.1016/j.jairtraman.2011.03.005
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    References listed on IDEAS

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    1. Oum, Tae H. & Park, Jong-Hun & Kim, Kwangsoo & Yu, Chunyan, 2004. "The effect of horizontal alliances on firm productivity and profitability: evidence from the global airline industry," Journal of Business Research, Elsevier, vol. 57(8), pages 844-853, August.
    2. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    3. J. Myles Shaver, 1998. "Accounting for Endogeneity When Assessing Strategy Performance: Does Entry Mode Choice Affect FDI Survival?," Management Science, INFORMS, vol. 44(4), pages 571-585, April.
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    Cited by:

    1. Cobeña, Mar & Gallego, à ngeles & Casanueva, Cristóbal, 2019. "Diversity in airline alliance portfolio configuration," Journal of Air Transport Management, Elsevier, vol. 75(C), pages 16-26.
    2. Belén Payán‐Sánchez & Miguel Pérez‐Valls & José Antonio Plaza‐Úbeda & Diego Vázquez‐Brust, 2022. "Network ambidexterity and environmental performance: Code‐sharing in the airline industry," Business Strategy and the Environment, Wiley Blackwell, vol. 31(3), pages 1169-1183, March.
    3. Min, Hokey & Joo, Seong-Jong, 2016. "A comparative performance analysis of airline strategic alliances using data envelopment analysis," Journal of Air Transport Management, Elsevier, vol. 52(C), pages 99-110.
    4. Never, Jan & Suau-Sanchez, Pere, 2020. "Challenging the interline and codeshare legacy: Drivers and barriers for airline adoption of airport facilitated inter-airline network connectivity schemes," Research in Transportation Economics, Elsevier, vol. 79(C).
    5. Yaghoub Abdi & Xiaoni Li & Xavier Càmara-Turull, 2023. "Firm value in the airline industry: perspectives on the impact of sustainability and Covid-19," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-24, December.
    6. Nicolau, Juan Luis & Sharma, Abhinav, 2022. "A review of research into drivers of firm value through event studies in tourism and hospitality: Launching the Annals of Tourism Research curated collection on drivers of firm value through event stu," Annals of Tourism Research, Elsevier, vol. 95(C).
    7. Castiglioni, Marco & Gallego, à ngeles & Galán, José Luis, 2018. "The virtualization of the airline industry: A strategic process," Journal of Air Transport Management, Elsevier, vol. 67(C), pages 134-145.

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