Technological Alliances and the Market Valuation of New Economy Firms

Abstract:     
Examines the effect on the Spanish stock marketof announcements of technological alliances by "new economy" companies.Using an event-study methodology, the studyfocuses on the impact on shareprices of new market firms announcing their interest to form technologicalalliances. To test a number of working hypotheses about the effects onreturns and volatility, all the announcements of technological alliancesbetween new market firms appearing in newspapers between 1997 and 2002 werecompiled, yielding a sample of 69 announcements by 13 different Spanish firms.A modified market model was developed, and the alliances were also analyzedwith a view to assessing their influence on stock market prices. The findings suggest that the announcement of a technological alliancecauses neither a positive nor a negative response in firms' market prices. Atthe same time, an increase in volatility during the event window was noticed.The analysis also suggests that the market valuation is more beneficial forjoint ventures and cross-border, cross-sectoral, and two-partner alliances.(CBS)

Keywords: Technology alliances, Stock performance, Stock markets, Joint ventures, Valuation, Alliance formation, Market volatility, New Economy, Strategic alliances

Accepted Paper Series