The Effect of Horizontal Alliances on Firm Productivity and Profitability: Evidence from the Global Airline Industry

This study examines the effect of horizontal alliances on firm performance in terms of productivity and profitability. Based on panel data from 22 international airline companies, which formed alliances during the period 1986–1995, the study reveals that horizontal alliances make a significant contribution to productivity gains, whereas they have no overall significant and positive impact on profitability. The study further shows that the level of cooperation in horizontal alliances influences the strength of the alliance effect on productivity and profitability. That is, alliances involving high-level cooperation are found to have a stronger significant and positive effect on both productivity and profitability than alliances involving low-level cooperation. Implications of the results are discussed.