Executive Summary
Managers are faced with increasing pressure to create firm value while competition increases and demand softens. Chief executive officers and top managers have responded by outsourcing certain types of functions in an effort to control costs and increase focus on core areas of the business. Marketing alliances with downstream value chain partners for sales, distribution, and customer service are one important manifestation of this trend. Marketing alliances give firms access to new markets, to new products and services, and to new knowledge and skills. How does the stock market react when firms announce marketing alliances? The results show that when firms announce marketing alliances in the high-tech software industry, these announcements have a positive impact on the value of both partnering firms.
In modern-day business, it is increasingly common to find firms involved in multiple and interconnected alliances with upstream suppliers and downstream buyers (i.e., vertical relationships) and alliances with other firms at the same level of the value chain (i.e., horizontal alliances). The authors predict that these complex relational forms, known as networks, influence the value created from the announcement of the new marketing alliance through three value creation mechanisms: (1) Networks multiply alliance benefits through alliance-to-network transfers and network-to-alliance transfers, (2) networks facilitate alliance compliance, and (3) networks signal firm and alliance quality. The results indicate that two network characteristics are particularly important—having a moderately efficient network and a moderately dense network. Firms that have access to a range of different industries in their previously formed network of partnerships (i.e., network efficiency) can reap rich rewards from a focal alliance. In an industry such as software, finding a variety of new applications for new products across a range of different industries may be easier when a firm can tap into its network of previous partnerships. Furthermore, when the partners within a firm’s network are connected to each other (i.e., network density), this fosters cooperation and reduces opportunism in the newly formed alliance. Finally, stock markets react more positively when firms have a successful track record of managing marketing alliances in the past. This means that managers should invest time, human resources, and money in managing marketing alliances.
In summary, in an era of tight budgets, managers may be tempted to reduce their focus on marketing by decreasing advertising and marketing expenditures. However, this underinvestment in marketing and brands may hurt a firm in the long-term. This article demonstrates that marketing alliances are one way a firm can pool resources with other firms to improve firm value. Furthermore, having a track record of successfully managing marketing alliances makes such value gains even more impressive for firms forming new alliances.
Biography
Vanitha Swaminathan is Associate Professor of Marketing in the Katz Graduate School of Business at the University of Pittsburgh. Her research has been published in Journal of Marketing, Journal of Marketing Research, Journal of Consumer Research, Strategic Management Journal, Journal of Advertising, and Journal of Business Research. Her research examines how marketing alliances and marketing resources exchanged in mergers can help in firm value creation. She also examines how consumer–brand relationships can be created and managed by firms and how brand strategies (e.g., cobranding, brand extensions) can foster creation of consumer–brand relationships. She has won the 2006 Best Paper Award in the Journal of Advertising and the 2002 Lehmann Award for the Best Dissertation Article in Journal of Marketing, and she was selected as a participant in the 2003 Marketing Science Institute’s Young Scholar Program.
Christine Moorman is T. Austin Finch, Sr. Professor of Business Administration in the Fuqua School of Business at Duke University. Chris’s research examines the nature and effects of information utilization and learning activities by consumers, managers, and organizations. It has been published in Journal of Marketing Research, Journal of Consumer Research, Marketing Science, Journal of Marketing, Journal of Public Policy & Marketing, International Journal of Research in Marketing, Academy of Management Review, and Administrative Science Quarterly. Chris is an associate editor at Journal of Marketing Research and is on the editorial review boards at Journal of Marketing, Marketing Science, Journal of Consumer Research, and Journal of Public Policy & Marketing. Her research has been supported by grants from the Marketing Science Institute and the National Science Foundation. She is winner of the 2008 Mahajan Award for Career Contributions to Marketing Strategy, she is a former member of the American Marketing Association’s Board of Directors and chair of the Marketing Strategy Special Interest Group, she is the former director of public policy for the Association for Consumer Research, and she is an academic trustee at the Marketing Science Institute.
Journal of Marketing, Volume 73, Number 5, September 2009
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