Make, buy, or ally? Choice of and payoff from announcements of alternate strategies for innovations

Marketing Science

Volumn 33, Issue 1, 2014, Pages 114-133

  Borah, Abhishek ^a   Tellis, Gerard J ^b  

^a UNIVERSITY OF WASHINGTON   (United States)

^b UNIVERSITY OF SOUTHERN CALIFORNIA   (United States)

Author keywords

Ally; Announcements; Buy; Content analysis; Event study; Innovation; Make; Stock market returns

Indexed keywords

EID: 84893426688     PISSN: 07322399     EISSN: 1526548X     Source Type: Journal    
DOI: 10.1287/mksc.2013.0818     Document Type: Article

References (93)

1. Bayus BL (2013) Crowdsourcing new product ideas over time: An analysis of the Dell IdeaStorm community. Management Sci. 59(1):226-244.
2. Bleeke J, Ernst D (2002) Is your strategic alliance really a sale? Faulkner D, ed. Strategy: Critical Perspectives on Business and Management, Vol. 4 (Routledge, London), 214-226.
3. Booz & Company (2012) The 2012 Global Innovation 1000: Key findings. Report, Booz & Company, New York. http://www.booz.com/media/file/BoozCo_The-2012-Global-Innovation-1000-Media-Report.pdf.
4. Boulding W, Staelin R (1995) Identifying generalizable effects of strategic actions on firm performance: The case of demandside returns to R&D spending. Marketing Sci. 14(3, Part 2): G222-G236.
5. Campbell JY, Lo AW, McKinley AC (1997) The Econometrics of Financial Markets (Princeton University Press, Princeton, NJ).
6. Capron L, Mitchell W (2010) Finding the right path. Harvard Bus. Rev. 88(7-8):102-107.
7. Capron L, Mitchell W (2012) Build, Borrow, or Buy: Solving the Growth Dilemma (Harvard Business Press, Cambridge, MA).
8. Carhart MM (1997) On persistence of mutual fund performance. J. Finance 52(1):57-82.
9. Cefis E, Marsili O (2006) Survivor: The role of innovation in firms' survival. Res. Policy 35(5):626-641.
10. Chandy R, Hopstaken B, Narasimhan O, Prabhu J (2006) From invention to innovation: Conversion ability in product development. J. Marketing Res. 43(3):494-508.
11. Chen Y, Liu Y, Zhang J (2012) When do third-party product reviews affect firm value and what can firms do? The case of media critics and professional movie reviews. J. Marketing 76(2):116-134.
12. Chesbrough H (2003) Open Innovation: The New Imperative for Creating and Profiting from Technology (Harvard Business School Press, Boston).
13. Cisco Systems Canada Co. (2009) Build, buy or ally growth strategies for business. Presentation by Joe Deklic, Cisco Systems Canada Co., Toronto. Accessed June 25, 2013, http:// www.slideshare.net/CiscoCanada/build-buy-or-ally-growth-strategies-for-business.
14. Cohen WM, Levinthal DA (1989) Innovation and learning: The two faces of R&D. Econom. J. 99(397):569-596.
15. Cyert RM, March JG (1963) A Behavioral Theory of the Firm (Prentice-Hall, Englewood Cliffs, NJ).
16. Day GS (1994) The capabilities of market-driven organizations. J. Marketing 58(October):37-52.
17. Doukas J, Switzer L (1992) The stock market's valuation of R&D spending and market concentration. J. Econom. Bus. 44(2): 95-114.
18. Dyer JH, Kale P, Singh H (2004) When to ally and when to acquire. Harvard Bus. Rev. 82(7-8):109-115.
19. Eccles RG, Lanes KL, Wilson TC (1999) Are you paying too much for that acquisition? Harvard Bus. Rev. 77(4):136-146.
20. Elberse A (2007) The power of stars: Do star actors drive the success of movies? J. Marketing 71(4):102-120.
21. Erickson G, Jacobson R (1992) Gaining comparative advantage through discretionary expenditures: The returns to R&D and advertising. Management Sci. 38(9):1264-1279.
22. Fama EF (1991) Efficient capital markets: II. J. Finance 46(5): 1575-1617.
23. Fama EF (1998) Market efficiency, long-term returns, and behavioral finance. J. Finance 49(3):283-306.
24. Fama EF, French KR (1993) Common risk factors in the returns on stocks and bonds. J. Financial Econom. 33(1):3-56.
25. Fama EF, Fisher L, Jensen MC, Roll R (1969) The adjustment of stock prices to new information. Internat. Econom. Rev. 10(1):1-21.
26. Fang E, Palmatier RW, Steenkamp JBE (2008) Effect of service transition strategies on firm value. J. Marketing 72(5):1-14.
27. Geyskens I, Gielens K, Dekimpe MG (2002) The market valuation of Internet channel additions. J. Marketing 66(2):102-119.
28. Geyskens I, Steenkamp J-BEM, Kumar N (2006) Make, buy, or ally: A transaction cost theory meta-analysis. Acad. Management J. 49(3):519-543.
29. Goldblatt H (1999) Forty-two acquisitions and counting: Cisco's secrets. Fortune 140(9):177-184.
30. Golder P (2000) Historical method in marketing research with new evidence on long-term market share stability. J. Marketing Res. 37(2):156-172.
31. Golder P, Tellis GJ (1993) Pioneering advantage: Marketing fact or marketing legend. J. Marketing Res. 30(May):158-170.
32. Gomes-Casseres B (2000) Alliances and risk: Securing a place in the victory parade. Financial Times (May 9) 6-7.
33. Greene WH (2003) Econometric Analysis, 5th ed. (Prentice-Hall, Upper Saddle River, NJ).
34. Greve HR (2003) Organizational Learning from Performance Feedback: A Behavioral Perspective on Innovation and Change (Cambridge University Press, Cambridge, UK).
35. Griffin A (2002) Product development cycle time for business-tobusiness products. Indust. Marketing Management 31(2):291-304.
36. Hagel J III, Brown JS (2011) Creation nets: Harnessing the potential of open innovation. J. Service Sci. 1(2):27-40.
37. Haleblian J, Kim J-Y, Rajagopalan N (2006) The influence of acquisition experience and performance on acquisition behavior: Evidence from the U.S. commercial banking industry. Acad. Management J. 49(2):357-370.
38. Hall BH, Jaffe A, Trajtenberg M (2005) Market value and patent citations. RAND J. Econom. 36(1):16-38.
39. Hauser J, Tellis GJ, Griffin A (2006) Research on innovation: A review and agenda for Marketing Science. Marketing Sci. 25(6): 687-717.
40. Hausman J (1978) Specification tests in econometrics. Econometrica 46(6):1273-1291.
41. Heimeriks K, Gates S, Zollo M (2008) The secrets of successful acquisitions. Wall Street Journal (September 22) http://online.wsj.com/news/articles/SB122160059703944839.
42. Hitt MA, Hoskisson RE, Johnson RA, Moesel DD (1996) The market for corporate control and firm innovation. Acad. Management J. 39(5):1084-1119.
43. Hitt MA, King D, Krishnan H, Makri M, Schijven M, Shimizu K, Zhu H (2009) Mergers and acquisitions: Overcoming pitfalls, building synergy and creating value. Bus. Horizons 52(6):523-529.
44. Jensen MC (1986) The agency costs of free cash flow: Corporate finance and takeovers. Amer. Econom. Rev. 76(2)323-329.
45. Joshi AM, Hanssens DM (2009) Movie advertising and the stock market valuation of studios: A case of "great expectations?" Marketing Sci. 28(2):239-250.
46. Kanter RM (1999) From spare change to real change: The social sector as beta site for business innovation. Harvard Bus. Rev. 77(3):123-132.
47. Karniouchina EV, Uslay C, Erenburg G (2011) Do marketing media have life cycles? The case of product placement in movies. J. Marketing 75(3):27-48.
48. Kelm KM, Narayanan VK, Pinches GE (1995) Shareholder value creation during R&D innovation and commercialization stages. Acad. Management J. 38(3):770-786.
49. Kengelbach J, Klemmer DC, Roos A (2012) How M&A can grow portfolio value: Plant and prune. bcg. perspectives (August 31) https://www.bcgperspectives.com/content/articles/mergers_acquisitions_divestitures_plant_and_prune_m_and_a_2012/.
50. Kessler EH, Chakrabarti AK (1996) Innovation speed: A conceptual model of context, antecedents, and outcomes. Acad. Management Rev. 21(4):1143-1191.
51. King DR, Dalton DR, Daily CM, Covin JG (2004) Meta-analyses of post-acquisition performance: Indications of unidentified moderators. Strategic Management J. 25(2):187-200.
52. Kreutzer M (2012) Selecting the right growth mechanism: The choice between internal development, strategic alliances, and mergers and acquisitions. Mennillo G, Schlenzig T, Friedrich E, eds. Balanced Growth: Finding Strategies for Sustainable Development (Springer, Berlin), 77-94.
53. Krishnan HA, Park D (2002) The impact of work force reduction on subsequent performance in major mergers and acquisitions: An exploratory study. J. Bus. Res. 55(4):285-292.
54. Krishnan HA, Hitt MA, Park D (2007) Acquisition premiums, subsequent workplace reductions and post-acquisition performance. J. Management Stud. 44(5):709-732.
55. Kuss O, McLerran D (2007) A note on the estimation of the multinomial logistic model with correlated responses in SAS. Comput. Methods Programs Biomedicine 87(3):262-269.
56. Lev B (2001) Intangibles-Management, Measurement and Reporting (Brookings Institution Press, Washington, DC).
57. Levitt B, March JG (1988) Organizational learning. Annual Rev. Sociol. 14:319-338.
58. Lichtenthaler U (2011) Open innovation: Past research, current debates, and future directions. Acad. Management Perspect. 25(1):75-93.
59. Luo X (2009) Quantifying the long-term impact of negative word of mouth on cash flows and stock prices. Marketing Sci. 28(1): 148-165.
60. March JG (1981) Footnotes to organizational change. Admin. Sci. Quart. 26(4):563-577.
61. Mayer D, Kenney M (2004) Ecosystems and acquisition management: Understanding Cisco's strategy. Indust. Innovation 11(4):299-326.
62. Miller D, Chen MJ (1994) Sources and consequences of competitive inertia: A study of the U.S. airline industry. Admin. Sci. Quart. 39(1):1-23.
63. Mizik N, Jacobson R (2003) Trading off between value creation and value appropriation: The financial implications of shifts in strategic emphasis. J. Marketing 67(1):63-76.
64. Nahavandi A, Malekzadeh AR (1988) Acculturation in mergers and acquisitions. Acad. Management Rev. 13(1):79-90.
65. Nakamura L (2001) What is the US gross investment in intangibles? (At least) one trillion dollars a year! Working Paper 01-15, Federal Reserve Bank of Philadelphia, Philadelphia.
66. O'Shaughnessy KC, Flanagan DJ (1998) Determinants of layoff announcements following M&As: An empirical investigation. Strategic Management J. 19(10):989-999.
67. Parkhe A (1993) Strategic alliance structuring: A game theoretic and transaction cost examination of interfirm cooperation. Acad. Management J. 36(4): 794-829.
68. Prabhu J, Rajesh C, Mark E (2005) Acquisition and innovation in high-tech firms: Poison pill, placebo, or tonic? J. Marketing 69(1): 114-130.
69. Ranft AL, Lord MD (2000) Acquiring new knowledge: The role of retaining human capital in acquisitions of high-tech firms. J. High Tech. Management Res. 11(2):295-319.
70. Rothaermel FT, Hess AM (2010) Innovation strategies combined. MIT Sloan Management Rev. 51(3):13-15.
71. Sharpe WF (1964) Capital asset prices: A theory of market equilibrium under conditions of risk. J. Finance 19(3):425-442.
72. Sood A, Tellis GJ (2009) Do innovations really payoff? Total stock market returns to innovation. Marketing Sci. 28(3):442-456.
73. Sorescu A, Chandy R, Prabhu J (2007) Why some acquisitions do better than others: Product capital as a driver of long-term stock returns. J. Marketing Res. 44(1):56-72.
74. Srinivasan R, Bharadwaj S (2004) Event studies in marketing strategy research. Moorman C, Lehmann DR, eds. Assessing Marketing Strategy Performance (Marketing Science Institute, Cambridge, MA), 9-28.
75. Srinivasan S, Hanssens DM (2009) Marketing and firm value: Metrics, methods, findings, and future directions. J. Marketing Res. 46(3):293-312.
76. Srinivasan R, Lilien GL, Sridhar S (2011) Should firms spend more on research and development and advertising during recessions? J. Marketing 75(3):49-65.
77. Steenkamp N (2013) HP regrets Palm acquisition. HumanIPO (June 12) http://www.humanipo.com/news/6550/hp-regrets-palm-acquisition/.
78. Swaminathan V, Moorman C (2009) Marketing alliances, firm networks, and firm value creation. J. Marketing 73(5):52-69.
79. Szulanski G (1996) Exploring internal stickiness: Impediments to the transfer of best practice within the firm. Strategic Management J. 17(Winter special issue):27-42.
80. Tellis GJ, Johnson J (2007) The value of quality. Marketing Sci. 26(6): 758-773.
81. Tellis GJ (2013) Microsoft and Nokia: A marriage made in hell? Forbes (September 4) http://www.forbes.com/sites/ forbesleadershipforum/2013/09/04/microsoft-and-nokia-a-marriage-made-in-hell/.
82. Tirunillai S, Tellis GJ (2012) Does chatter really matter? Dynamics of user-generated content and stock performance. Marketing Sci. 31(2):198-215.
83. Trautwein F (1990) Merger motives and merger prescriptions. Strategic Management J. 11(4):283-295.
84. Varadarajan PR, Ramanujam V (1987) Diversification and performance: A reexamination using a new two-dimensional conceptualization of diversity in firms. Acad. Management J. 30(2):380-393.
85. Varaiya NP, Ferris KR (1987) Overpaying in corporate takeovers: The winner's curse. Financial Analysts J. 43(3):64-70.
86. Verbeek M, Nijman T (1992) Testing for selectivity bias in panel data models. Internat. Econom. Rev. 33(3):681-703.
87. West J, Vanhaverbeke W, Chesbrough H (2006) Open innovation: A research agenda. Chesbrough H, Vanhaverbeke W, West J, eds. Open Innovation: Researching a New Paradigm (Oxford University Press, Oxford, UK), 285-307.
88. Wiles MA, Morgan NA, Rego LL (2012) The effect of brand acquisition and disposal on stock returns. J. Marketing 76(1):38-58.
89. Wiles MA, Jain SP, Mishra S, Lindsey C (2010) Stock market response to regulatory reports of deceptive advertising: The moderating effect of omission bias and firm reputation. Marketing Sci. 29(5):828-845.
90. Williamson OE (1975) Markets and Hierarchies: Analysis and Antitrust Implications (Free Press, New York).
91. Wooldridge JM (1995) Selection corrections for panel data models under conditional mean independence assumptions. J. Econometrics 68(1):115-132.
92. Worthen B, Scheck J (2013) Inside H-P's missed chance to avoid a disastrous deal. Wall Street Journal (January 21) http://online.wsj.com/news/articles/SB1000142412788732363550457821174 3521976174.
93. Ybarra CE, Turk TA (2011) Strategic alliances with competing firms and shareholder value. J. Management Marketing Res. 6(January). http://www.aabri.com/manuscripts/10565.pdf.