Economic impact of marketing alliances on shareholders' wealth

Purpose-The purpose of this paper is to examine whether marketing alliances create value for shareholders, and whether the results are robust across different business cycles. Design/methodology/approach -Using standard event study methodology, abnormal returns (AR) were computed for 402 firms which formed marketing alliances in a 12-month period covering three business time periods, namely bull, bear and post 9/11 periods. ANOVA and regression analyses were performed on cumulative abnormal returns (CAR). Findings-Significant and positive AR were found on announcement day for firms forming marketing alliances. When the sample is segmented by market capitalization, small cap firms were found to stand to benefit the most, particularly when partnering with a large firm. During the bear market period, marketing alliances tend to benefit small cap firms and firms with low profitability, whereas during the bull market period, marketing alliances benefit firms with low asset utilization. Research limitations/implications -Results are limited by the accuracy of the models used to measure AR. Practical implications-The results seem to suggest that smaller partners tend to benefit more from marketing alliance, and the effect changes with business cycle. Originality/value-The paper analyses how the benefits of forming a marketing alliance are shared between partnering firms and how the different phases of business cycle influence the distribution of benefits.