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 maximizes
the stock market returns upon its announcement continues to be a contentious topic
in joint venture literature. With some prior findings suggesting that high inter-partner
relatedness may be best for companies and other studies suggesting the contrary, the
evidence on the matter is inconclusive. In this study, we found that returns are highest
when inter-partner relatedness is neither too low nor too high. Further, we found
evidence that the type of joint venture matters, with returns being significantly higher
for highly related companies when they announce a marketing deal than when
they announce a manufacturing one.