An Examination of Wealth Creation of Global R&D Collaborations

Abstract

Existing literature on interfirm cooperation has not clearly explicated how stock markets value new knowledge development through international R&D alliances. Based on the perspectives of interorganizational learning and technology capabilities development, this study develops a theoretical model with factors that are proposed to affect stock market valuations of cross-border R&D activities. The proposed factors include past linkages between partnering firms, individual firm`s absorptive capacity, similarity of technology bases between partners and intellectual property protection level of partner`s home country. With a sample of 160 dyad-international R&D alliances formed during the period of 1995-2000 in high tech industries, this study tested the proposed model separately for U.S.-firms and non-U.S. firms. Empirical findings suggest that individual firm`s absorptive capacity significantly influenced market valuation of international R&D alliances for both U.S. and non-U.S. firms sample groups. Past direct linkages and technology bases similarity were significantly associated with market valuation of only U.S. firms sample. However, intellectual property level of partner`s home country did not have any substantial impact on stock market valuations. These findings provide new insights for managers to develop alliance management capabilities.