| This thesis studies the signaling effects of strategic alliances on small partner firms. First, I show through a theoretical model that high-tech, R&D-intensive firms with low collateralizable and verifiable net worth face capital constraints. The model is extended to show that alliance formation acts as a positive signal to capital markets of the good quality of these firms and, as a result, relaxes their capital constraints.;Second, given that high-tech, R&D intensive firms in innovative industries face capital constraints, I test empirically the signaling effect of alliances to capital markets. Given theoretical evidence of the higher cost of equity relative to debt, I use a panel data set of 126 small and medium size, high-tech, R&D-intensive, computer firms during the period 1988-95 to conclude that alliance formation has a positive effect on financial leverage, controlling for other variables that influence leverage such as internal financing, non-debt tax shields, firm risk, potential, and size. Also, previous alliance formation diminishes the effects of future alliance formation. The relative size of the partner, multiple alliance formation in the same year, and the size of the inventor do not influence the effects of alliance formation on leverage.;Third, I also test empirically the existence of capital constraints for the firms included in the data set described above. The tests provide robust evidence for the existence of capital constraints. The study also provides evidence that alliance formation increases R&D spending. However, it does not provide robust evidence that alliance formation decreases the dependence of a firm on internal funds to finance R&D and capital expenses.;Finally, in this thesis, I experiment with the use of the network analysis methodology to describe the structure of two alliance networks: the interwar chemical cartels and a computer firm alliance network. This methodology is a useful tool for mapping the relationships within an alliance network and the relative positions of the member firms. |
