State‐Owned Enterprises and Cross‐Border Alliances

Abstract This study examines the international alliance activities of state‐owned enterprises (SOEs). We find that country‐level political and economic factors, such as autocracy, foreign ownership restrictions, foreign currency reserve, and industry dissimilarity, increase the likelihood of SOEs’ participation in cross‐border alliances. Our analyses further reveal that foreign firms tend to collaborate with local SOEs when facing high expropriation risks and the presence of a state‐dominated banking system in the host country. Further, foreign firms experience higher announcement returns when they ally with local SOEs rather than with non‐SOEs. This result suggests that the exclusive benefits from SOEs are value‐creating for the international alliance partners. Overall, our findings provide novel insights into the determinants and wealth effect of SOEs’ engagement in international alliance activities.