The intra business group effects of alliance network extensions

I. Fen Chen, Shao Chi Chang

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

Purpose – The purpose of this paper is to better understand the influence of business group membership by exploring how actions by a member firm influence other firms in the business group. Specifically, the authors ask two questions in this study: when a member firm forms strategic alliances with partners outside of the business group, how does the alliance influence other members in the business group? Moreover, which types of member firms are more affected than others? Design/methodology/approach – The authors employ standard event-study methodology to examine the stock price responses for the focal and member firms on the announcement of an alliance. Moreover, the authors employ the cross-sectional regression analyses to test hypotheses concerning the impact of alliance, group, and firm characteristics on the cumulative abnormal returns of non-announcing members. All regressions are estimated using ordinary least squares. Findings – The results show that, on average, alliance-announcing member firms experience significantly positive share price responses to announcements of strategic alliances. Moreover, the impact of alliance formation spillover to other non-announcing members in the business group. The authors also find that the influences on the non-announcing members are dissimilar. The non-announcing members are more strongly affected when they are in different industries from the non-member partner, and when the ownership of the business group is more concentrated. Originality/value – This study is to extend the resource complementarities perspective, which may help firms to more effectively configure their network portfolios in order to develop synergies among related network resources. The study thus extends the alliance portfolio literature to the literature on business groups. Since the inter-firm networks within business groups are more complex than those in alliance portfolios, the authors are able to study how the structure of a business, such as ownership concentration, can influence the intra-network effect.

Original languageEnglish
Pages (from-to)1420-1442
Number of pages23
JournalManagement Decision
Volume54
Issue number6
DOIs
Publication statusPublished - 2016 Jul 11

Fingerprint

Alliance network
Business groups
Alliances
Strategic alliances
Announcement
Alliance portfolios
Price response
Design methodology
Stock prices
Synergy
Group membership
Cross-sectional regression
Hypothesis test
Ownership
Cumulative abnormal return
Resources
Network effects
Complementarity
Alliance formation
Spillover

All Science Journal Classification (ASJC) codes

  • Business, Management and Accounting(all)
  • Management Science and Operations Research

Cite this

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The intra business group effects of alliance network extensions. / Chen, I. Fen; Chang, Shao Chi.

In: Management Decision, Vol. 54, No. 6, 11.07.2016, p. 1420-1442.

Research output: Contribution to journalArticle

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