U.S. manufacturers facing tariff cuts expanded alliances while acquisitions held steady
Hanwen Sun and co-authors found that among 1,127 U.S. manufacturers, firms facing tariff cuts expanded alliances while acquisitions stayed broadly flat. The alliance firms later showed higher R&D intensity and patent output, a link the authors call an association.
The Scientist · Science desk
What happened
- According to Zhang, the tilt toward alliances was strongest in firms with less financial or operational room, firms at a competitive disadvantage, and industries with lower entry barriers.
- Zhang said alliances gave incumbents a more cost-effective and flexible way to expand than acquisitions did.
- The alliances Zhang described included partners in the same industry and in high-tech, business-to-consumer and product-differentiated sectors.
Why it matters
- decision Managers weighing a response to a new import competitor get one data point: in this sample the cheaper route, alliances, was the one that grew, especially at constrained firms.
- constraint The innovation finding is an association, so it cannot support a claim that alliances cause more R&D or patents, and a policy argument built on it inherits that limit.
- contradiction The study's framing says firms chose alliances over acquisitions, but its quoted result says acquisitions stayed broadly unchanged, so the data show one option rising and the other flat.
The study's framing is collaboration over conquest [9], but the quoted result is narrower. Dr. Chenjian Zhang of the University of Western Australia Business School, a co-author, said: "We found businesses under increased threat from foreign competition were more likely to expand their strategic alliances, while acquisition activity remained broadly unchanged," [4]. Alliances rose and acquisitions did not move. The "over" in the framing describes the gap between those two lines.
Timing limits how far the result travels. The sample covers 1990 to 2020 [1], but most of the cuts fall in 1995 and many reflect NAFTA's implementation [3]. In large part this is a NAFTA-era sample. The cuts in 2004 and 2008 are the later episodes [3], and we would want results split by year before applying the pattern to a tariff shock that looks different from a trade-agreement phase-in.
Zhang's explanation for why alliances grew is that they "allow businesses to share risk, access new technologies and pool knowledge and resources" [10]. On innovation he said "these partnerships were associated with higher subsequent research and development intensity and patent output" [6].
The safe reading is that firms which allied under competitive pressure later showed more innovation. Whether the alliances produced it is a separate claim. The study cannot rule out that firms already inclined to invest in R&D were the ones that allied.
Hanwen Sun and co-authors published the paper, "To Acquire or to Ally? Foreign Competition and Firm Boundary," in the Journal of Business Finance & Accounting in 2026 [8]. The release does not include effect sizes, the number of alliances formed, or results by tariff-cut year.
What to watch
- The full paper's tables: effect sizes, the number of alliances formed, the comparison group and results by tariff-cut year.
- Whether the alliance-to-innovation link holds after controlling for each firm's R&D intensity before the tariff cut.
- Whether follow-up work tests tariff shocks outside the NAFTA era, since most cuts here fall in 1995.
Clarity's read
What the record supports and how the coverage leans. The claims behind it follow.
Reality
- Evidence50
- Adoption
- Insufficient
- Hype gap+15
- Incentives
- Insufficient
- Confidence55
Claim ledger
Ranked by verification strength, evidence, and original report placement.
- [1]
The research studied the response of 1,127 U.S. manufacturing firms to staggered reductions in U.S. import tariffs between 1990 and 2020.
- [2]
The research was co-authored by Dr. Chenjian Zhang of The University of Western Australia Business School and published in the Journal of Business Finance and Accounting.
- [3]
Many of the tariff cuts reflected implementation of NAFTA in 1994; most cuts in the sample occurred in 1995, with others in years including 1992, 1997, 2004 and 2008.
- [4]
"We found businesses under increased threat from foreign competition were more likely to expand their strategic alliances, while acquisition activity remained broadly unchanged," Zhang said.
- [5]
The decision to pursue alliances over expensive acquisitions was particularly pronounced in firms with less financial or operational room to move or which were at a competitive disadvantage, and in industries with lower barriers to entry, Zhang said.
- [6]
"In our study, these partnerships were associated with higher subsequent research and development intensity and patent output, with companies that formed alliances in response to competitive pressure going on to demonstrate stronger innovation performance," Zhang said.
- [7]
Zhang said alliances offered incumbents a more cost-effective and flexible mode of expansion than acquisition, and were associated with stronger subsequent innovation.
- [8]
The paper is Hanwen Sun et al., To Acquire or to Ally? Foreign Competition and Firm Boundary, Journal of Business Finance & Accounting (2026), DOI 10.1111/jbfa.70091.
- [9]
The study found domestic firms shifted toward collaboration over conquest, seeking out new alliances rather than stepping up acquisitions.
- [10]
"Strategic alliances, whether with companies in the same industry or in high-tech, business-to-consumer or product-differentiated sectors, allow businesses to share risk, access new technologies and pool knowledge and resources," Zhang said.
- [11]
The alliances Zhang described included partnerships with companies in the same industry or in high-tech, business-to-consumer or product-differentiated sectors.
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Sources
1 independent publisher whose own reporting we read for this story.
- phys.orgFirms facing tariff shocks choose collaboration over conquest
1 article · October 14, 2026
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Entities
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