Staying Close to the Core: Lessons from Studying the Costs of Unrelated Alliances in Spanish Banking

Long Range Planning

Volumn 42, Issue 2, 2009, Pages 194-215

  García Casarejos, Nieves ^a   Alcalde Fradejas, Nuria ^a   Espitia Escuer, Manuel ^a  

^a NONE

Author keywords

[No Author keywords available]

Indexed keywords

BENEFITS AND COSTS; CORE BUSINESS; DIVERSIFICATION STRATEGIES; SHAREHOLDER VALUES; STRATEGIC ALLIANCES;

SHAREHOLDERS;

BANKING; BUSINESS; CORPORATE STRATEGY; COST-BENEFIT ANALYSIS;

EID: 63249100543     PISSN: 00246301     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.lrp.2009.01.003     Document Type: Article

References (61)

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12. Majority share acquisitions and the placement of shares on the market, securitization operations, credit syndication by several banks and minority share acquisitions by banks in other firms which are for expressly financial reasons, are excluded.
13. See. Koh J., and Venkatraman N. Joint Venture formations and stock market reactions: an assessment in the information technology sector. Academy of Management Journal 34 4 (1991) 869-892
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18. For positive findings, see J. Koh and N. Venkatraman (1991) (op. cit. at Ref 3).
19. S. Balakrishnan and M. Koza (1993) and S. Park and D. Kim (1997), all op. cit. at Ref 3.
20. and. Chan S.H., Kensinger J.W., Keown A.J., and Martin J.D. Do strategic alliances create value?. Journal of Financial Economics 46 (1997) 199-221
21. For the opposite view, see. Johnson S.A., and Houston M.B. A reexamination of the Motives and Gains in Joint Ventures. Journal of Financial and Quantitative Analysis 35 1 (2000) 67-87
22. and J. J. Reuer and M. P. Koza (2000), op. cit. at Ref 3.
23. The partners in a JV which are in the same industry as their JV achieved significant positive shareholder value, according to J. Koh and N. Venkatraman (1991).
24. S. Park and D. Kim (1997) both op. cit. at Ref 3.
25. Merchant H., and Schendel D. How do International Joint Ventures Create Shareholder Value?. Strategic Management Journal 21 (2000) 723-737
26. and. Hanvanich S., Richards M., Miller S.R., and Cavusgil S.T. Technology and the effects of cultural differences and task relatedness: A study of shareholder value creation in domestic and international joint ventures. International Business Review 14 (2005) 397-414 only in high tech industries
27. But, for the 'no gain' view, see J. J. Reuer and M. P. Koza (2000). op. cit. at Ref 3.
28. and. Fröhls M., Keown A., McNabb M., and Martin J. Growth Opportunities, Corporate Governance and the market value of Multinational Joint Ventures. Managerial and Decision Economics 19 (1998) 13-29
29. Although with mixed findings, there are many more empirical studies providing evidence of value creation for the shareholders of firms entering into alliances, including the following: J. Koh and N. Venkatraman (1991); S. Balakrishnan and M. Koza (1993), S. Park and D. Kim (1997); J. J. Reuer and M. P. Koza (2000), all op. cit. at Ref 3.
30. Chen H., Hu M.Y., and Shieh J. The wealth effect of international joint ventures: the case of U.S. investment in China. Financial Management (winter) (1991) 31-41
31. The role of both related and unrelated partners in an alliance's creation of value for shareholders has been analysed by: J. Koh and N. Venkatraman (1991), and J. J. Reuer and M. P. Koza (2000), both op. cit. at Ref 3.
32. S. H. Chan et al. (1997) and S. A. Johnson and M. B. Houston, (2000), both op. cit. at Ref 4, among others.
33. Reference to García-Canal and Sanchéz-Lorda to follow.
34. The alliance between Banco Santander and Royal Bank of Scotland is a good example of a successful alliance in which complementarity and leverage are at the centre of value creation. Specifically, the wealth created for BS's shareholders was 2 per cent the day the deal was announced. The keys to the alliance's success can be found in. Vidal M., and Garcia-Canal E. Complementarity and Leverage as Drivers of the Stock Market Reaction to Global Alliance Formation. Long Range Planning 36 (2003) 565-578
35. For a more detailed analysis of aspects related to learning in alliances, see:. Hamel G. Competition for competence and inter-partner learning within international strategic alliances. Strategic Management Journal 12 (1991) 83-103
36. and. Khanna T., Gulati R., and Nohria N. The dynamics of learning alliances: competition, cooperation, and relative scope. Strategic Management Journal 19 (1998) 193-210
37. Other factors associated with instability, besides inter-partner learning, would be, according to. Gill J., and Butler R.J. Managing Instability in Cross-Cultural Alliances. Long Range Planning 36 6 (2003) 543-563 unexpected contingencies, undesirable alliance performance, an obsolescing bargain, conflicts in shared management, cross cultural differences, control/ownership structure (e.g. 50:50 joint ventures), partner characteristics and changes in the external environment
38. For more information about Ansoff's matrix see. Ansoff I. Corporate Strategy (1965), McGraw Hill, New York
39. Strategic alliances are used as part of diversifying or expanding strategies; and one application of these concepts for the financial services sector can be found in:. Gleason K.C., Mathur I., and Wiggins III R.A. Evidence on Value Creation in the Financial Services Industries through the use of Joint Ventures and Strategic Alliances. The Financial Review 38 (2003) 213-234
40. To learn more about the creation of value in task related JV-partners and task related JV-partners in high tech industries see, respectively, J. Koh and N. Venkatraman (1991), op. cit. at Ref 3;
41. and S. Hanvanich et al. (2005), op. cit. at Ref 5.
42. The interactions between the two factors have been analysed by S. Park and D. Kim (2000) and by J. J. Reuer and M. P. Koza (2000), both op. cit. at Ref 3.
43. This effect, as well as the positive and significant revaluation found on the following day (t = +2), may be due to serial negative autocorrelation (relative to the previous day) within the market itself. A technical correction occurs after a shock which is perceived as positive by the market and gives rise to a positive reaction among investors. These movements, then, may be the result of speculative effects caused by the entry of investors wishing to take positions in the market.
44. See B. N. Anand and T. Khanna (2000), op. cit. at Ref 3;
45. S. H. Chan et al. (1997), op. cit. at Ref 4; and H. Chen et al. (1991), op. cit. at Ref 6.
46. In 20 alliances, abnormal returns are calculated for 2 banks; in 4 of them for 3 banks; in another 4 there are 4 announcing banks; one alliance involved five announcing banks and, finally, one involved 11 announcing banks.
47. According to. Hoffmann W.H. How to Manage a Portfolio of Alliances. Long Range Planning 38 2 (2005) 121-143 firms with multiple alliances with a given partner often come from the same industry. This is true of Spanish banking sector alliances as, at least during the study period, the same banking partners are found repeatedly in successive alliances. The positive value given by the market to the presence of intra-industrial networks in the Spanish banking sector is justified: a) by the presence of common, long-term objectives, b) because banks operating in networks gain a reputation as trustworthy partners, and c) because each individual network could form a strategic group with which it would be able to compete with other networks
48. These findings are consistent with those of S. H. Chan et al. (1997), and S. A. Johnson and M. B. Houston (2000), both op. cit. at Ref 4.
49. who also find that value is created independently of whether the partners are related or not; as well as those of J. Koh and N. Venkatraman (1991), op. cit. at Ref 3.
50. and S. H. Chan et al (1997) ibid., who find that more value is created in alliances between partners from the same industry.
51. Alcalde N., Espitia M., and García-Casarejos N. Análisis ex ante de la generación de valor para los bancos españoles que entran a formar parte de las empresas conjuntas. Cuadernos de Economía y Dirección de la Empresa 18 (2003) 69-95
52. See also J. Koh and N. Venkatraman (1991); S. Park and D. Kim (1997); and J. J. Reuer and M. P. Koza (2000), all op. cit. at Ref 3.
53. Grant R.M., and Baden-Fuller C. A Knowledge Accessing Theory of Strategic Alliances. Journal of Management Studies 41 1 (2004) 61-84 Based on the distinction between access and acquisition of knowledge, they present a theory of strategic alliances that focuses upon the role of strategic alliances, not in acquiring, but in accessing the knowledge resources of other firms
54. Our conclusions for the Spanish market are reinforced by the findings of K. C. Gleason et al. (2003) op. cit. at Ref 13, as American banks, more than any other financial service providers, are the most skilled in successfully expanding the scope of their operations through joint ventures and strategic alliances.
55. Likewise, S. H. Chan et al. (1997), op. cit. at Ref 4, showed that horizontal strategic alliances generate more value than their diversified counterparts.
56. These international strategic alliances between major Spanish banks and local, largely Latin American firms, could potentially not generate value if the Spanish firms follow the pattern found by. Sleuwaugen L., Schep K., Hartog G.D., and Commandeur H. Value creation and the alliance experiences of dutch Companies. Long Range Planning 36 6 (2003) 533-542 for Dutch firms. These authors find that working with partners of different national origins tends to increase the relational risk, which, if unmanaged, may undermine the value creation potential of ISAs. In our case, the generation of value for this type of alliance could show that the potential risk associated to culturally distant foreign partners is potentially less than that of physical distance, as Spain shares a common history and language with Latin America, so this case the institutional and cultural context would have a positive impact on the value created by such alliances
57. In order of revenue, the leading construction firms in Spain are: ACS (Dragados), Ferrovial, FCC, Acciona, OHL, Sacyr Vallehermoso, according to the 2007 ranking published by Actualidad Económica and Iberinform (which belongs to Grupo Crédito y Caución).
58. Production alliances are classified as those in which the financial institution performs an administrative or financial management function for another organisation, outsources non-strategic ancillary activities, or develops customised financial products, such as personalised credit cards, with the partner. Marketing alliances are those which enable the establishment of customer loyalty programmes, offer improved conditions (promotions) to specific groups, or share marketing networks, etc. Financial alliances include those in which the bank is merely a financial partner (such as in venture capital forms) as well as participation in financial funds or when the agreement merely involves a long-term stock acquisition by the bank. Technological alliances include agreements related to the new information technologies in general, aimed at either developing internal management tools for banks or at generating new electronic distribution channels (mobile banking, television, the Internet, etc.).
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