Effective cooperation modes based on cultural and market similarities in interfirm relationships

This study explores appropriate cooperation modes based on cultural and market similarities and suggests two alliance cooperation modes: 1) contractual cooperation and 2) relational cooperation. We collected secondary data from diverse sources, including the SDC Platinum, Compustat, and CRSP databases. We examined 349 alliances in high-tech industries from 2001 to 2009. We used an event study methodology to measure abnormal stock returns associated with the announcement of an alliance because it provides a forward-looking metric of expected performance. The results show that equity sharing enhances the positive effects of cultural distance on a focal firm's returns while repeated partnership exacerbates the negative effects of product market similarities on a focal firm's returns. This research contributes to alliance literature, providing explanation for choosing an appropriate cooperation mode considering both transaction cost economics (TCE) and a resource-based view (RBV). This study suggests that the effect of a contractual or relational cooperation mode depends on the competitive or cooperating role of similarity. Additionally, our study tries to provide guidelines for managers in selecting an appropriate cooperation mode depending on the relationship characteristics of the two companies.