How does a partner's acquisition affect the value of the firm's alliance with that partner?

Abstract

Research Summary How does an acquisition initiated by a firm's alliance partner affect the value that the firm can create and capture from its alliance with that partner? We conjecture that the similarity between the businesses of the firm and its partner's acquisition target restricts the firm's ability to create and capture value from its alliance, whereas the complementarity between their businesses enhances the firm's gain from its alliance. We further expect relational embeddedness between the firm and its partner to mitigate the competitive tension associated with similarity while reinforcing synergies ascribed to complementarity. Our analysis of 361 firms and their 590 alliances with 91 partners that acquired 164 targets during 2000–2016 supports our predictions about business similarity and complementarity but refutes those concerning relational embeddedness. Managerial Summary When a firm's partner engages in an acquisition, this can impact the value of their alliance. We show that when the acquired target competes with the firm, the value of the alliance declines. In turn, when the target and firm's businesses are complementary, the alliance creates more value. We also find that when the firm and the partner had extensive experience working together, this reinforces the negative effect of business similarity with the target, probably because of perceived betrayal and knowledge leakage. Joint experience also reduces the value of complementarity, likely due to the difficulty of modifying collaborative practices. We encourage managers to scrutinize their partners' corporate initiatives, reduce commitment when the partner acquires a competing target, and leverage new complementarities following the partner's acquisitions.

Investors’ Reactions to Alliance‐Engendered Acquisition Ambiguity: Evidence from U.S. Technology Deals

“…Model 1 in Table III contains only the control variables, whereas in Models 2 to 9, we also introduce our independent and moderating variables. The explanatory power of the regressions ranges from 15 per cent to 16 per cent, which is similar to earlier M&A event studies in technology‐driven industries (Laamanen et al, 2014; Lavie et al, 2022). Furthermore, F‐tests for model improvement after the addition of our independent variables to the regression models indicate that their inclusion explains significant additional variance compared with the reduced models without these variables (e.g., Reus and Lamont, 2009).…”

“…Thus, our study offers a viable explanation of investors’ reactions to the announcement of major corporate events, such as acquisitions, whose structural characteristics are opaque to investors in terms of their value‐creation potential. Second, we contribute to the emerging stream of research in the literature that highlights that alliances and acquisitions are not just alternative means of corporate development but also have the potential to interfere with one another (Lavie et al, 2022; Tandon et al, 2023). Our study reveals that, although alliances may be perceived as valuable relational assets of autonomous partners, changes in ownership via acquisition may cause them to be perceived as potential sources of value distraction.…”

Supplier–supplier coopetition and buyer innovation: a perspective of learning and competitive tension within the focal buyer's supplier network

“…One possible reason is whether relational duration can amplify the effect of learning and mitigate the effect of competitive tension may be constrained by the complexity characterizing the context (Lascaux, 2020). In some cases, supplier–supplier competition may be seen as a betrayal of trust by the suppliers, and this negative signal can result in a breakdown of trust between buyer and suppliers, increasing the tension undermining value creation (Lavie et al. , 2022).…”

“…, 2022). Such competition effect is viewed as a strong threat to suppliers within the supplier network, causing suppliers more suspicious and aware of others' competitive actions (Lavie et al. , 2022).…”

“…Firstly, high competition means that suppliers are generally similar in value proposition and market positioning so that they are capable to internalize others' knowledge as much and as quickly as possible (Runge et al, 2022). Such competition effect is viewed as a strong threat to suppliers within the supplier network, causing suppliers more suspicious and aware of others' competitive actions (Lavie et al, 2022). Moreover, the focal buyer's purchasing amount is often fixed in a certain period, suppliers are more motivated to compete and gain "a bigger pie" (Runge et al, 2022).…”