Does Partner Volatility Have Firm Value Relevance? An Empirical Analysis of Part Suppliers

Abstract

Considering the lifecycle of products, firms are releasing new products through diversified strategic partnerships via the global supply chain. As the uncertainty about the future increases and strategic partnership grows more important, part suppliers are becoming more and more significant in assessing firm value. From the perspective of the signaling effect, this study analyzed the impact of partner volatility (new partner, old partner, revocation partner) on firm value in terms of global supply chain management. Regarding both Apple and Samsung which have bisected the premium smart phone market, research results reveal that companies eliminated from partnership selection are found to show negative signaling effect, and the newly selected companies have the stronger innovative capacity and higher signaling effect of higher excess earning rate than that of re-selected companies. The findings indicate that the partner volatility of partner companies work as a reliable investment signal for investors to recognize as an investment indication, contributing to firm value. In particular, it is meaningful to confirm that a new partner’s differentiated R&D capacity is a key factor of new product launching and a significant variable capable of determining a firm’s survival in the smart phone market.