Tutorial 6: Alliances vs MA

Question 1

Three laws of business combinations

Answer 1

1- the combination must have the potential to create more value than the parties can alone (synergy
2- the combination must be designed and managed to realise joint value
3- the value earned by the parties must motivate them to contribute to the combination

Question 2

MAs

Answer 2

Refer to cases of joint activities where two once separate companies are combined into one company

Question 3

Conditions under which companies prefers M&A or strategic alliances:

Answer 3

1- sectoral differences (industry dynamism)
2- core business
3- regime of appropriability (strong=alliance)
4- routines

Question 4

MAeffect on innovative performance in High tech industries

Answer 4

1- non-technological acquisitions will have no or a negative effect on innovative performance
-> disruption or not of innovation routines consuming managerial time and energy

2- the absolute size of the acquired knowledge base positively affects the innovation performance

• > broader knowledge base enabling synergies (economies of scale and scope)
• > reducing redundant R&D efforts
• > result knowledge depreciates over time

3- the relative size of acquired knowledge negatively affects innovation performance

• > disruption
• > complex, time consuming and risky integration
• > reallocation of resources to help integration

4- technological relatedness of the acquired knowledge base is curvilinear related to the post M&A innovative performance

• > enough overlap to facilitate absorption capacity
• > enough diversity to make substantial contribution

Question 5

MA effect on innovative performance interesting finding

Answer 5

Cultural distance can have a positive effect because it forces firms to rethink their innovation strategy in a more international context.