Do Japanese Firms Outperform U.S. Partners in Technology Alliances?: A Test of Market Valuations

Abstract

Do Japanese firms perform better than U.S. partner firms in strategic alliances? Past research has suggested that Japanese firms are more benefited from interfirm cooperation than U.S. counterparts. In this study, we examined how stock markets value interfirm cooperation between U.S. and Japanese firms by using 228 alliances formed in high-tech industries during the period of 1995-2000. The results showed that stock markets expected that U.S. firms would perform better in technology alliances with Japanese partners, contradictory to prior work warning of potential erosion of competitiveness through alliances with Japanese firms. We also found that R&D investment significantly influenced market valuation effects of Japanese firms, while the similarity of technology bases between partners generated positive returns for U.S. firms.