Inter-Firm Connections, Alliance Formation and the Value Created by Alliances

55 Pages Posted: 28 Apr 2020

See all articles by Yun Liu

Yun Liu

Claremont Colleges - Keck Graduate Institute

Tomas Mantecon

University of North Texas

Sabatino Silveri

University of Memphis - Fogelman College of Business and Economics

Wei Sun

University of Memphis - Fogelman College of Business and Economics

Date Written: April 5, 2020

Abstract

We investigate the impact of inter-firm connections on alliances. We find that both professional connections, borne out of current employment ties and board interlocks along with social connections, borne out of past employment ties and educational ties, increase the likelihood of alliance formation. In addition, the market reacts more favorably to alliance announcements in the presence of such connections. Moreover, the positive valuation effects associated with connections increase with the degree of information asymmetry between the partner firms. Our findings are consistent with inter-firm connections creating value because it helps firms identify suitable alliance partners and facilitates the flow of information between partner firms, thereby reducing moral hazard concerns and the risk of ex-post opportunistic behavior.

Keywords: alliances; inter-firm connections; social networks

JEL Classification: D8, L14, L24

Suggested Citation

Liu, Yun and Mantecon, Tomas and Silveri, Sabatino and Sun, Wei, Inter-Firm Connections, Alliance Formation and the Value Created by Alliances (April 5, 2020). Available at SSRN: https://ssrn.com/abstract=3568815 or http://dx.doi.org/10.2139/ssrn.3568815

Yun Liu

Claremont Colleges - Keck Graduate Institute ( email )

535 Watson Drive
Claremont, CA 91711
United States

Tomas Mantecon

University of North Texas ( email )

1155 Union Circle #305340
Denton, TX 76203
United States

Sabatino Silveri

University of Memphis - Fogelman College of Business and Economics ( email )

3675 Central Avenue
Memphis, TN 38152
United States

Wei Sun (Contact Author)

University of Memphis - Fogelman College of Business and Economics ( email )

Memphis, TN 38152
United States

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