Unlocking Strategic Alliances: The Role of Common Institutional Blockholders in Promoting Collaboration and Trust

52 Pages Posted: 21 Jul 2023

See all articles by Thomas J. Chemmanur

Thomas J. Chemmanur

Boston College - Carroll School of Management

Yao Shen

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance

Jing Xie

University of Macau, Faculty of Business Administration, Department of Finance and Business Economics

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Date Written: July 11, 2023

Abstract

This paper examines the role of common institutional blockholders (CIB) in promoting strategic alliances and facilitating the transfer of human capital between alliance firms. We find that firms are more likely to form strategic alliances, including R&D, licensing, manufacturing, and marketing alliances, when they share CIBs with a larger proportion of their industry competitors. To establish a causal relationship, we leverage the annual Russell 1000/2000 index reconstitutions. Our firm-pair level analysis indicates that when two firms share a CIB, they have a higher likelihood of forming strategic alliances. Furthermore, we show that R&D alliance firms connected through CIBs exhibit a greater cross-partner redeployment of R&D-related human capital than those without CIB connections, increasing the benefits from alliance formation. Overall, our findings underscore the significance of CIB ownership in reducing distrust which can hinder the establishment of strategic alliances and in reaping the economic benefits resulting from such alliances.

Keywords: Common Institutional Blockholders, Strategic Alliances, Corporate Innovation

JEL Classification: G23, G32, O31, O32

Suggested Citation

Chemmanur, Thomas J. and Shen, Yao and Xie, Jing, Unlocking Strategic Alliances: The Role of Common Institutional Blockholders in Promoting Collaboration and Trust (July 11, 2023). Available at SSRN: https://ssrn.com/abstract=4509164 or http://dx.doi.org/10.2139/ssrn.4509164

Thomas J. Chemmanur

Boston College - Carroll School of Management ( email )

Finance Department, 436 Fulton Hall
Carroll School of Management, Boston College
Chestnut Hill, MA 02467-3808
United States
617-552-3980 (Phone)
617-552-0431 (Fax)

HOME PAGE: http://https://www2.bc.edu/thomas-chemmanur/

Yao Shen (Contact Author)

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance ( email )

55 Lexington Ave
New York, NY 10010
United States

Jing Xie

University of Macau, Faculty of Business Administration, Department of Finance and Business Economics ( email )

E22-4064, FBA building
Macau
Macau, 000000
China
+853 88224639 (Phone)

HOME PAGE: http://fba.um.edu.mo/faculty/jingxie/

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