The Effect of International Strategic Alliances on Firm Performance Before and After the 2008 Global Financial Crisis This paper investigates whether international strategic alliances have an effect on firm performance. Specifically, I focus on the effect of the strategic alliances between domestic ...
The Effect of International Strategic Alliances on Firm Performance Before and After the 2008 Global Financial Crisis This paper investigates whether international strategic alliances have an effect on firm performance. Specifically, I focus on the effect of the strategic alliances between domestic and foreign companies on firm performance and the differences in the effects depending on international strategic alliance type. In addition, I examine the changes in the effects of strategic alliances caused by the 2008 global financial crisis. I analyze the issue empirically using accounting measures that are relatively free from methodology problems, such as common method bias (CMB), and using accounting variables as dependent variables following the suggestion of Christoffersen (2013) and Christoffersen et al. (2014) to measure the strategic alliance performance. They found evidence to suggest that accounting measures have better construct validity than other performance measures, such as CAR, stability, and subjective measures in terms of hypothesis level and measure level. In addition to recent literature that suggests the problem related to the measures of strategic alliance performance (dependent variable), I also control independent variables that can have an effect on firm performance using accounting data. The samples are data from KOSPI- and KOSDAQ-listed companies over the period from January 1, 2001 to December 31, 2014. I use hand-collected data related to international strategic alliances from daily economic newspapers on the webpage of the Korea Press Foundation (http://www.kinds.or.kr) by carefully searching for keywords in order to make up for the problems caused by subjective measures and minimize the bias caused by the hand-collecting process. Additionally, to find the effect of international strategic alliances, the matching method is used between the control group (non-strategic alliance group) and the treatment group (international alliance group). I choose the most similar sample for the treatment group by the matching method. Using Korea Standard Industry Code: KSIC-9, I calculate the industrial and yearly average of non-strategic alliance firms’ characteristics in the same industry in which strategic alliance firms are included. I examine a sample of 799 non-strategic alliance samples and 290 international strategic alliance samples (total sample of 1,089) in order to find the effect of international strategic alliances on firm performance. As dependent variables, the means of ROE and ROA over three years (t, t+1, t+2) are used as firm performance after fixing dummy variables for international strategic alliances in the previous year (t-1), and other independent variables are the one-year lagged three-year averages (t-1, t, t+1). Most of all, I expect there to be a change in the types or effects of international strategic alliances during crises, since firms change strategy in economic recessions for survival. Therefore, I divide the whole sample into two sub-samples: before- and after-2008 global financial crisis. In that process, I suggest strong evidence that international strategic alliances have an effect on domestic firms’ performance. I find the following empirical results. First, my findings support the previous literature that international strategic alliances have significantly positive effects on firm performance. Second, the effect of international strategic alliances on firm performance depends on the type of strategic alliance, such as JV, licensing, and R&D. Third, from the 2008 global financial crisis, there are changes in the effects of international strategic alliances on firm performance. Fourth, according to the empirical results, strategic alliance performance can be changed by different periods. This study contributes to the literature in four ways. First, to the best of my knowledge, it is the first empirical paper to analyze the effect of international strategic alliances on firm performance by considering the effect of the 2008 global financial crisis. Second, I suggest that considering economic conditions (e.g., crises, business cycles, or business fluctuations) is very important in international strategic alliance research. Third, I use objective accounting measures to examine the effect of international strategic alliances on firm performance, because the importance of using objective data and measures has come to the fore in the recent literature on international strategy, such as strategic alliances. Finally, this paper finds convincing evidence that international strategic alliances have an effect on firm performance by controlling variables not considered in the previous literature using listed domestic firms that have established actual international strategic alliances.
The Effect of International Strategic Alliances on Firm Performance Before and After the 2008 Global Financial Crisis This paper investigates whether international strategic alliances have an effect on firm performance. Specifically, I focus on the effect of the strategic alliances between domestic and foreign companies on firm performance and the differences in the effects depending on international strategic alliance type. In addition, I examine the changes in the effects of strategic alliances caused by the 2008 global financial crisis. I analyze the issue empirically using accounting measures that are relatively free from methodology problems, such as common method bias (CMB), and using accounting variables as dependent variables following the suggestion of Christoffersen (2013) and Christoffersen et al. (2014) to measure the strategic alliance performance. They found evidence to suggest that accounting measures have better construct validity than other performance measures, such as CAR, stability, and subjective measures in terms of hypothesis level and measure level. In addition to recent literature that suggests the problem related to the measures of strategic alliance performance (dependent variable), I also control independent variables that can have an effect on firm performance using accounting data. The samples are data from KOSPI- and KOSDAQ-listed companies over the period from January 1, 2001 to December 31, 2014. I use hand-collected data related to international strategic alliances from daily economic newspapers on the webpage of the Korea Press Foundation (http://www.kinds.or.kr) by carefully searching for keywords in order to make up for the problems caused by subjective measures and minimize the bias caused by the hand-collecting process. Additionally, to find the effect of international strategic alliances, the matching method is used between the control group (non-strategic alliance group) and the treatment group (international alliance group). I choose the most similar sample for the treatment group by the matching method. Using Korea Standard Industry Code: KSIC-9, I calculate the industrial and yearly average of non-strategic alliance firms’ characteristics in the same industry in which strategic alliance firms are included. I examine a sample of 799 non-strategic alliance samples and 290 international strategic alliance samples (total sample of 1,089) in order to find the effect of international strategic alliances on firm performance. As dependent variables, the means of ROE and ROA over three years (t, t+1, t+2) are used as firm performance after fixing dummy variables for international strategic alliances in the previous year (t-1), and other independent variables are the one-year lagged three-year averages (t-1, t, t+1). Most of all, I expect there to be a change in the types or effects of international strategic alliances during crises, since firms change strategy in economic recessions for survival. Therefore, I divide the whole sample into two sub-samples: before- and after-2008 global financial crisis. In that process, I suggest strong evidence that international strategic alliances have an effect on domestic firms’ performance. I find the following empirical results. First, my findings support the previous literature that international strategic alliances have significantly positive effects on firm performance. Second, the effect of international strategic alliances on firm performance depends on the type of strategic alliance, such as JV, licensing, and R&D. Third, from the 2008 global financial crisis, there are changes in the effects of international strategic alliances on firm performance. Fourth, according to the empirical results, strategic alliance performance can be changed by different periods. This study contributes to the literature in four ways. First, to the best of my knowledge, it is the first empirical paper to analyze the effect of international strategic alliances on firm performance by considering the effect of the 2008 global financial crisis. Second, I suggest that considering economic conditions (e.g., crises, business cycles, or business fluctuations) is very important in international strategic alliance research. Third, I use objective accounting measures to examine the effect of international strategic alliances on firm performance, because the importance of using objective data and measures has come to the fore in the recent literature on international strategy, such as strategic alliances. Finally, this paper finds convincing evidence that international strategic alliances have an effect on firm performance by controlling variables not considered in the previous literature using listed domestic firms that have established actual international strategic alliances.
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