How Does a Partner’s Acquisition Affect the Value of the Alliance?

How does an acquisition initiated by a firm’s alliance partner affect the value that the firm can create and capture from its alliance with that partner? We study this question by drawing from the relational view. We contend that the similarity between the businesses of the firm and its partner’s acquisition target restricts the firm’s ability to create and capture value from its alliance, whereas the complementarity between their businesses enhances the firm’s gain from its alliance. We further conjecture that relational embeddedness between the firm and its alliance partner mitigates competition while facilitating synergies ascribed to complementarity with the target’s business. We test these predictions during the years 2000-2016, with an analysis of the stock market returns to 361 firms that engaged in 590 alliances with 91 partners around the time these partners’ announced the acquisitions of 164 targets. Our findings support the predictions about the implications of business similarity and complementarity, but refute the ones concerning the moderating effects of relational embeddedness. We conclude that a partner’s acquisition of a target whose business is similar to that of the firm signifies failure of the embedded relationship between the firm and that partner, while the rigidity of their relation-specific routines undermines the firm’s ability to gain from synergies associated with its complementarity with the target’s business. Our study offers new insights into the interplay of alliances and acquisitions and informs research on the dynamics of alliance relations."