Technological alliances and the market valuation of new economy firms

The article investigates a sample of 69 announcements of technological alliances involving new economy firms in Spain, over the five-year period from 1997 to 2002. The purpose of the study is to analyse the impact of these announcements on share prices and volatility in these firms. Various alliance characteristics are also examined in order to analyse their influence on stock market prices. Our findings suggest that, while there is no overall reaction of share prices to the announcement of technological alliances, there is an increase in volatility during the event window. Nevertheless, the analysis enables us to conclude that the market valuation is more positive for joint ventures and cross-border, cross-sectoral, and two-partner alliances. The observed effect on volatility indicates that the announcement of the formalisation of these alliances constitutes an abnormal amount of information, with a potentially significant effect on the variability of share prices. (c) 2004 Elsevier Ltd. All rights reserved.