Stock Market Response to Multiple Alliance Announcements: A Multi-Industry Analysis

We document frequency distribution of 4315 two-party, non-equity alliances undertaken bythe U.S. based firms between 1986 and 2015 in 11industries and find that on an aggregate basis, the firms which form multiple alliances based on the exploitation motive are as likely to enter into alliance as the firms that enter into multiple alliances based on the exploration motive. However, we find strong evidence that the firms that enter into alliances on three or more occasions are driven by the exploration motive while firms that enter into alliances one and one or two times are driven by the exploitation motive. The average cumulative abnormal returns (ACAR) for all of the three subsamples of firms that undertook one, one or two, and three or more alliances during the time period for this study are all positive but exhibit a declining trend. Firms that are larger in terms of total assets engage more frequently in alliances than smaller firms. Returns to firms that enter into three or more alliances are sensitive to the leverage employed and the likelihood of bankruptcy whereas returns to firms that enter into only one or one or two alliances are affected significantly by the considerations of competitive forces.