Merger Spillovers in Collaborative Partnerships

Collaborative partnerships create interfirm linkages that potentially tie the fortunes of partnering firms to changing circumstances and decisions of each other. Yet not much is known about how firms in such partnerships are affected by their partners' post-formation decisions outside of decisions that are directly connected to the partnership itself. We begin to fill this gap by examining the stock price and operating performance of firms whose collaborative partners merge with other firms. We find that merger announcement return to the non-merging partner is positive. Its postmerger abnormal sales growth and operating profitability are also positive. These effects are larger when the merger creates additional resource complementarities for the non-merging partner through product-market or technological relatedness