Firm Value Creation of Global R&D Collaborations

Existing literature on interfirm cooperation has not clearly explicated how stock markets value new technology development through global R&D collaborations. Based on the perspective of knowledge-based view of the firm, this study develops a theoretical model with factors that are proposed to affect stock market valuations of cross-border R&D activities. The proposed factors include past linkages between partnering firms, individual firm’s absorptive capacity, similarity of technology bases between partners and intellectual property protection level of partner’s home country. With a sample of 160 dyad-global R&D collaborations formed during the period of 1995- 2000 in high tech industries, this study tested the proposed model separately for U.S.-firms and non-U.S. firms. Empirical findings suggest that individual firm’s absorptive capacity significantly influenced market valuation of global R&D cooperative activities for both U.S. and non-U.S. firms sample groups. Past direct linkages and technology bases similarity were significantly associated with market valuation of only U.S. firms sample. However, intellectual property level of partner’s home country did not have any substantial impact on stock market valuations. These findings provide new insights for managers to create alliance management capabilities.