The Effect of Inter-partner Relatedness On Stock Market Reactions To Joint Venture Announcements: Differences Between Manufacturing and Marketing Deals

Abstract

The degree of relatedness between a joint venture´s partners that maximizesthe stock market returns upon its announcement continues to be a contentious topicin joint venture literature. With some prior findings suggesting that high inter-partnerrelatedness may be best for companies and other studies suggesting the contrary, theevidence on the matter is inconclusive. In this study, we found that returns are highestwhen inter-partner relatedness is neither too low nor too high. Further, we foundevidence that the type of joint venture matters, with returns being significantly higherfor highly related companies when they announce a marketing deal than whenthey announce a manufacturing one.