Building Alliance Capabilities through Information Technology: The Effect of IT Resources on the Market Value Effects of Alliance Announcements

Does the investment in firm-specific IT resources lead to better alliance performance? This study proposes to answer this question by empirically examining the effect of a firm’s IT resources on the performance consequences of individual alliances for firms. Drawing upon previous works on organizational learning and dynamic capability, we identify and discuss key mechanisms that convert IT resources into alliance capability. Also, this study explores whether the effect of IT resources significantly varies depending on alliance characteristics, such as the types of activities and governance structures of alliances. Following an event-study approach, this empirical study analyzes the effect of IT expenditure on the stock market response to a new alliance announcement. 179 public firms spanning multiple industries in the United States account for 2,433 data points of alliance announcements from 1998 to 2005. The results are supportive of our hypotheses that a firm’s IT resources enhance its alliance performance.