Chapter 7 - Making Strategic Alliances and Networks Work

Question 1

Strategic alliances

Answer 1

are “voluntary agreements between firms involving exchanging, sharing, or co-developing of products, technologies, or services.”

Question 2

Strategic networks

Answer 2

(or constellations) are strategic alliances formed by multiple firms to compete against other networks and singular firms

Question 3

Resource based consideration - Rarity: relational (collaborative) capabilities

Answer 3

the capabilities to successfully manage interfirm relationships

Question 4

Resource based consideration - Rarity: partner rarity

Answer 4

the difficulty to locate partners with certain desirable attributes due to industry structure and network position

Question 5

Network centrality:

Answer 5

• It is a partner rarity resource based consideration.

- The extent to which the firm’s position is pivotal with respect to others in the interfirm network

Question 6

What approach most firms adopt at firm level based in the resource-based considerations?

Answer 6

trial-and-error approach

Question 7

Institution-based considerations- Formal regulatory pillar:

Answer 7

(collusion concerns and entry requirements):

Formal legal and regulatory frameworks impact

Question 8

Institution-based considerations- Normative pillar:

Answer 8

• (the social pressures to find partners):
• Protect their legitimacy
• Normative pressure from business press, investment community and board deliberations

Question 9

Institution-based considerations- cognitive pillar:

Answer 9

(the internalized beliefs in the value of collaboration)

Question 10

Formation stages:

Answer 10

• Stage one: To cooperate or not to cooperate
• Stage Two: Contract or Equity?
• Stage three: Positioning the relationship

Question 11

Exploitation:

Strong or weak tie?

Answer 11

• refinement, choice, production, efficiency, selection, and execution
• strong ties

Question 12

Exploration:

Strong or weak tie?

Answer 12

• search, variation, risk taking, experimentation, play, flexibility, discovery, and innovation
• weak ties

Question 13

4 factors that may influence the performance of alliances and networks:

Answer 13

• equity
• learning and experience
• nationality
• relational capabilities

Question 14

Stock market responds favorably to alliance activities, but only under certain circumstances:

Answer 14

• Complementary resources
• Previous alliance experience
• Ability to manage the host country’s political risk
• Partner buyouts

Question 15

Resource Based considerations -Organization for alliances and networks:

Answer 15

• At firm level, most firms adopt a trial-and-error approach

- At alliance/network level, difficult for others to replicate

Question 16

What is Contractual (non-equity-based alliance? Give examples of it.

Answer 16

Those are contracts that does not involve sharing ownership:

• co-marketing
• R&D contract
• Turnkey project
• Strategic supplier
• Strategic distributor
• Licensing/Franchising

Question 17

What are Equity-based alliances? Give examples of it.

Answer 17

Alliance based on ownership or financial interest between the firms:

• strategic investment
• cross-shareholding
• joint venture

Question 18

Antitrust authorities are more likely to approve what? why?

Answer 18

They are more likely to approve alliances than acquisitions because it would eliminate an competitor. That is part of the formal regulatory pillar in institutional based considerations

Question 19

Institution based considerations - informal normative pillar:

Answer 19

the social pressure to find partners

*protect their legitimacy

Question 20

Institution based considerations - informal cognitive pillar:

Answer 20

the internalized beliefs in the value of collaboration

Question 21

What are possible ways to minimize the threat of opportunism?

Answer 21

• Walling off critical skills and technologies through contractual safeguard
• Swapping critical skills and technologies through credible commitments:
• In international alliances, setting up a parallel and reciprocal relationship in the foreign partner’s home country may increase the incentives for both partners to cooperate

Question 22

Advantages of strong ties:

Answer 22

• Exchanging finer-grained, higher quality information

- Serve as an informal, social control mechanism that is an alternative to formal contracts for combating opportunism.