Costs, valuation, and long-term operating effects of global strategic alliances

Using global product design and development as an example of global strategic alliance, I find that successful global strategic competition is still largely a variable cost reduction game as opposed to the recently touted fixed cost amortization game. Further, the firm's cost efficiency is enhanced when its global production initiative is characterized by a high degree of strategic alliances. Importantly, I find that global strategic alliances have both valuation effects and long-term operating effects, and that both effects are positive functions of the degree of strategic alliances. After controlling for pertinent explanatory factors such as competitive strategy posture, industry concentration, geographic spread of operation, product-type, and information technology infrastructure of firms, I find that variable cost and production efficiencies remain significant determinants of the valuation effects of global business alliances. Overall, results in this study suggest partnering firms should consider the relative efficiencies of inputs and production technology as effective ways of leveraging the benefits of global strategic alliances.