Impact of Inter-firm Cooperation on Company's Performance: a Comparative Analysis of EU and Russia

<p style="text-align: justify;">Nowadays, the problem of improving financial performance is exacerbating for a firm that aims to increase value and attract investors. At the same time, the approach, according to which it is considered that companies involved in cooperation with other market players gain a competitive advantage, has become popular among scientists and practitioners. This paper is devoted to the identification of the differences in the influence of company&#39;s participation in inter-firm relationships on financial performance between European Union and Russian companies. In order to conduct the empirical analysis, we used data for 823 EU and 556 Russian firms, for the period from 2004 to 2011. Using Hausman-Taylor method, we revealed that participation in inter-firm relationships increases Economic Value Added of both European and Russian companies if analyze this relationship during 8-year period. However, some differences in the effects of cooperation between EU and Russia with regard to particular stages of the economy cycle, i.e. growth, crisis and recovery periods were found. In Russia, inter-firm cooperation stimulates financial performance in the growth period more intensively than in the crisis times, while the influence becomes negative in the recovery period. In EU, in turn, cooperation drives EVA both in the prosperity and recession periods, being more intensive in the crisis, and has statistically insignificant influence on financial performance after crisis.&nbsp;&nbsp;&nbsp; This implies that financial results of cooperation may be highly sensitive to the environment and economy conditions under which the phenomenon is tested, so future researchers should take it into account. From the practical point of view, our findings prove that it is beneficial for investors to put money in companies which are engaged in the long-term partnerships rather than isolated firms. At the same time, managers and directors of such firms should undertake additional control measures to avoid opportunistic behavior of its partners in the crisis and recovery times, especially in Russia.</p>