The Impact of the Number and the Familiarity of Alliance Formations on a Firm’s Performance: The Case of the Korean Telecommunications Industry

Abstract

Most managers face a decision as to whether to increase the number of alliances they form or not and which type of partners they should select. This paper investigates the impact of the number of alliance formations and the degree of familiarity in alliances on a firm’s economic performance in the Korean telecommunications industry. The empirical results show that growth in the overall number of alliance formations negatively influences the firm’s performance. This result is mainly due to the fact that the Korean telecommunications industry has become saturated, and therefore the potential benefit from the alliance is limited. However, greater familiarity in emergent alliances has positive effects on performance. This implies that an alliance related to the reduction of transaction costs through the company’s existing resources and governance capability tends to make a direct contribution to performance by generating effective synergies.