R&D intensity, cross-border strategic alliances, and valuation effects

• We examine the effect of R&D on cross-border strategic alliance formations.
• R&D intensity is the primary driver of cross-border strategic alliance decisions.
• R&D intensive firms prefer alliances in Continental Europe and Emerging Asia-Pacific regions.
• R&D intensity cannot distinguish between ownership forms of the overseas partner.
• The wealth effects of cross-border alliances are determined by R&D intensity.

This paper examines the role of R&D intensity in cross border strategic alliance formation. Firms can exploit their existing R&D capabilities by entering into overseas markets via strategic alliances. Consistent with our hypothesis, we find R&D intensity to be a major determinant of cross-border strategic alliance decisions involving US firms. R&D intensive firms prefer alliances in Continental Europe and Emerging Asia-Pacific regions. R&D intensity, however, cannot distinguish between the ownership forms of the overseas partner as the firm may not have the opportunity to choose the nature of the partner once the alliance decision has been made. Finally, we examine the valuation effect of cross-border strategic alliance announcements and find the associated wealth effects to be driven primarily by R&D intensity.