Alliance with a Rival’s Partner and Firm Performance: Focused on the US Software industry

Alliance with a rival’s partner is not uncommon in the real business world. However, less attention has been paid to an alliance with a rival’s partner leaving the nature of such an alliance understudied. This study attempts to fill the void by exploring the value creation implication of an alliance with a rival’s partner. Event study results of 1,332 alliances of the 63 US software companies between 1995 and 2005 shows that alliances with rivals’partners are associated with higher cumulative abnormal return than alliances that do not involve rivals. We also found that the effects of alliances with a rival’s partner decline when the rival has a similar resource profile with a focal firm and when the rival is high performing. This study contributes to the literature on strategic alliances and competitive dynamics. Additionally, it advances our understanding of the performance outcomes regarding the relational dynamics among the focal firm, its rival, and their common partner.