Interorganizational information sharing in the airline industry: An analysis of stock market responses to code-sharing agreements

Abstract

This paper addresses the issue of inter-organizational information sharing alliances and their impacts on firm values from the perspective of inter-organizational coordination between partners in the airline industry setting. We investigate the shareholder wealth effects of inter-organizational information-sharing alliance arrangements, using 131 code-sharing agreements in the airline industry during 1984-1997. Employing event study methodology we found that the information sharing alliances between similar partners did create positive value in terms of stock returns at the time of alliance announcements to major US airlines. However, alliances between dissimilar partners resulted in significant losses of shareholder value to the major airlines. These results strongly support our main hypotheses that information-sharing alliances are successful and the benefits of such alliances are realized only when the coordination difficulties can be effectively dealt with.