Title: The signal complexity of international alliances in pre-IPO firms

Authors: Adam W. Smith; Kaveh Moghaddam; Amir Pezeshkan

Addresses: Department of Management, Jones College of Business, Middle Tennessee State University, 145 N Business and Aerospace Building, 1301 E Main St., Murfreesboro, TN 37132, Tennessee, USA ' Department of Management, School of Business Administration, University of Houston-Victoria, 340 Brazos Hall, 14000 University Blvd., Katy, TX 77449, Texas, USA ' Department of Management and International Business, Merrick School of Business, University of Baltimore, Business Center 555, 11 Mt. Royal Blvd., Baltimore, MD 21201, Maryland, USA

Abstract: Applying signalling theory to firm valuation, we theorise that firms engaging in international alliances produce complex signals. We match archival data on attributes and the alliancing activities of pre-IPO firms to construct a sample of 106 technology companies receiving funding venture capital. We then conduct ANOVA and regression analysis. The use of international alliances, the structure of the alliance, and alliance formation in institutionally challenging regions all positively affect investors' valuations of young ventures. These findings suggest that in addition to providing access to resources or markets, alliances can serve as signals about focal firm characteristics, alerting venture capitalists to the growth potential of pre-IPO ventures. A venture's ability to form an international alliance, particularly in an institutionally challenging region, signals a level of managerial adeptness and venture resource quality/quantity to investors.

Keywords: venture financing; venture valuation; international alliances; signalling theory.

DOI: 10.1504/IJIPM.2020.111380

International Journal of Intellectual Property Management, 2020 Vol.10 No.3, pp.199 - 215

Received: 13 Sep 2019
Accepted: 17 Sep 2019
Published online: 23 Nov 2020 *

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