Information Environment and Interfirm Alliance

• In Event: Information Usefulness

Abstract

This paper examines whether and how firm-specific information environment influences interfirm alliance, a key boundary spanning strategy in the modern economy. Using a large firm-level panel on collaborative innovation from 29 countries, we provide strong evidence that firms with more transparent information environment have better collaborative outcomes (as measured by both the number of joint patents and the number of collaborators). Further cross-sectional analyses show that information environment matters more when collaborative partners have greater reliance on informal relationship rather than formal contracting (i.e., in countries with weaker legal environment or in industries with greater asset specificity). However, the benefit of information is mitigated by proprietary costs (i.e., high-tech intensive firms). A mediation (path) analysis shows that facilitating interfirm alliances (i.e., expanding firm network) serves as a key channel through which information improves a firm’s overall innovative productivity. The robustness to firm-level fixed effects and a difference-in-differences approach suggests that our results are unlikely driven by omitted variables or reverse causality. Overall, our study provides novel evidence on the role and channels of accounting information in expanding firm network, and promoting economic performance.

Authors

• Feng Gao, Rutgers Business School - Newark and New Brunswick

• Rong(Irene) Zhong, University of Illinois at Chicago