How does a partner’s acquisition affect the value of the firm’s alliance with that partner?

How does an acquisition initiated by a firm’s alliance partner affect the value that the firm can create and capture from its alliance with that partner? We conjecture that the similarity between the businesses of the firm and its partner’s acquisition target restricts the firm’s ability to create and capture value from its alliance, whereas the complementarity between their businesses enhances the firm’s gain from its alliance. We further expect relational embeddedness between the firm and its partner to mitigate the competitive tension associated with similarity while reinforcing synergies ascribed to complementarity. Our analysis of 361 firms and their 590 alliances with 91 partners that acquired 164 targets during 2000–2016 supports our predictions about business similarity and complementarity but refutes those concerning relational embeddedness.