When Does Partnering Create Market Value?

The dramatic increase in interorganizational partnering in the last two decades raises questions regarding the value impact of alliances. Using event study methodology, this paper tests whether stock market reactions differ when an alliance formation or termination is announced. In addition, it provides an in-depth analysis of potential determinants of stock market reactions. The results show that transaction cost theory and signaling theory in tandem provide predictive power explaining the effects of formation and termination announcements. However, the theories propose contradicting effects regarding the impact of firm and alliance characteristics on the value mark-up.