Strategic Alliance in Science-Based Industry: An Event Study
Analysis of Organic Light Emission Diode Industry in Japan
Extended Abstract for
Comparative Analysis of Enterprise Data 2009 Conference, October 2-4, 2009
Tamane Ozekia,* and Koichiro OkamurabaThe University of Tokyo, Tokyo, Japanb

Japan Science and Technology Agency, Tokyo JapanJEL Classification: L24, O32, L64.
Extended Abstract
Strategic alliances have increasingly been used in recent years as innovation
activities require the knowledge and technologies from a range of industries. They areexpected to accelerate the research and development activities through the mechanismssuch as combination of complementary partners’ assets, synergies, or internalization ofknowledge spillovers. This study empirically analyzes the alliance activities in theorganic light emission diode (OLED) industry in Japan in order to study the roles ofstrategic alliances in science-based industry.
OLED was invented and then published in the Applied Physics by C.W. Tangof Kodak in 1987. It is a film of organic compounds, of which structure is made of anemissive layer, a conductive layer, a substrate, and electrodes. The layers are conductive
organic molecules, of which conductivity levels ranging from insulators to conductors.
Organic compounds are “printed” in matrix of minute cells onto a flat carrier, whichform pixels that emit light of different colors when they are turned on. In short, OLED
is an organic semiconductor that is based on chemistry and semiconductor technologies.
OLED doesn’t require a backlight to function since it emits light by itself, which makes
it a thin and low-energy consuming device. Examples of prospective applications ofOLED include flat panel display or lighting fixture.
*Correspondence to: Tamane Ozeki, Research Center for Advanced Science andTechnology, The University of Tokyo, 4-6-1 Komaba, Meguro-ku, Tokyo, 153-8904,
JAPAN.
E-mail: tamane@dimmi.jp

OLED is an organic semiconductor that is based on chemistry andsemiconductor technologies. Thus the research and development of OLED devices
requires a wide range of knowledge and technologies ranging from basic sciences suchas chemistry or physics to applied engineering technologies such as semiconductor
technologies or industrial chemistry. This makes a room for alliances and collaborations
among firms, universities and other research institutions for the commercialization ofthe technology. An initial observation alliance formation shows that the patterns ofalliance formation include collaborations with academic researchers, combination ofmaterial producers and product makers, and in some cases, partnerships through capitaltie-up.

It is also observed that the number of alliance formations between firms

increased just before when particular products are introduced in the market, of which
example are car audio products in 2002 and flat panel televisions in 2007.
Theoretical frameworks explaining the formation of alliances are categorized
in three. Namely, transaction cost theory and industrial organization theory ineconomics and resource-based view in management study. Transaction cost theory, forexample, explains that a firm may enter into alliance when it considers that the costs inpromoting certain business with strategic partner are lower than that of its own endeavor.
Industry organization theory pays a particular attention to public-good nature ofknowledge and explains that firms collaborate to internalize the spillover of knowledge.
Finally, resource-based view that views firms as a collection of unique capabilities andresources difficult to acquire claims that firms enter into alliances seeking forcomplimentary resources otherwise unavailable. In case of alliance formation in OLED
industry, it doesn’t seem that one theory explains them very well. Rather they seem tobe explained by the combination of these theories. In other words, multiple factors suchas cost efficiency, resource complementarity or knowledge spillover are found inalliances in the case of OLED.
This study thus empirically analyzes the factors that influence the allianceformation in OLED industry with event-study analysis, the basic idea which is that theimpact of an event (alliance formation in this study) is assessed with the abnormal
return attributable to the focused event by taking the difference between a firm’s stock
price in stock market on the event date and its stock price estimated through theextrapolating from stock prices prior to the event. A rationale behind the methodology is,in short, that investors in the stock market can collectively appreciate the impact of-2-

event to firms’ value. For analysis, the information about alliances was collected fromthe “Nikkei Telecom 21”, a database storing articles of Japanese major newspapers,
between 1999 and 2008. Other information such as firms’ stock prices and financial
data was collected as well.
It is found that the alliances with firms from different industries and thosebringing complementary resources are more highly valued in the stock market.
Alliances with the capital tie-up are more highly valued than the alliances for justcontact purpose. The study indicates that strategic alliances plays important roles in
research and development even in a science-based industry, such as OLED, where asingle knowledge or technology plays a major role in a product. The analysis suggeststhat the application of OLED technologies depends on the choice of strategic partners,
which influences, to some degree, both the overall corporate strategies and thedevelopment of industry.

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