Interfirm alliance configuration as a strategy to reduce shareholder risks

This article investigates how interfirm alliance configuration strategies reduce shareholder risks via the alignment of "what" types of alliances to establish and "with whom" to build such alliances. Two concepts are introduced, partner relatedness and alliance relatedness, to consider how alliance partners and alliance activities relate to the focal firm's business activities. Building upon the dynamic capabilities literature and using secondary data, this research empirically demonstrates that the effects of alliance configuration strategy on shareholder risks depend on the type of risks (idiosyncratic or systematic) and the degree of industry environment changes. With low market dynamism, the consolidation strategy of high partner relatedness/high alliance relatedness reduces idiosyncratic risk. Yet with high market dynamism, the expansion strategy of low partner relatedness/low alliance relatedness decreases idiosyncratic risk. In contrast, the mixed configuration strategies of high partner relatedness/low alliance relatedness or low partner relatedness/high alliance relatedness lessens systematic risk independent of market dynamism.