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RESEARCH PRODUCT
The Importance of Alliances in Firm Capital Structure Decisions: Evidence from Biotechnology Firms
Giovanna Lo NigroJonathan O'brienFabio Zambutosubject
050208 financeLeverage (finance)Capital structureStrategy and Management05 social sciencesManagement Science and Operations ResearchMicroeconomicsMarket economyBiopharmaceutical industryAllianceManagement of Technology and Innovation0502 economics and businessEconomicsFinancial distressBusiness and International Management050203 business & managementdescription
Building on finance research, we argue that the ex post hazards arising from alliance formation depend upon the firm's financial condition. Financial distress jeopardizes the continuity of an alliance and the value of the investments involved. Thus, firms should reduce leverage to signal continued commitment and to induce investments from alliance partners. Accordingly, we find that a firm's current alliance propensity predicts its subsequent capital structure decisions and that this relationship is most pronounced in the presence of other exchange hazards. Our paper contributes to alliance research and to the growing literature discussing the strategic consequences of capital structure. Copyright © 2015 John Wiley & Sons, Ltd.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2015-05-11 | Managerial and Decision Economics |