Week 11 & 12 Flashcards
Define a strategic alliances
A strategic alliance exist whenever two or more independent organisations cooperate in the development, manufacture, or sale of products or services
Why do firms engage in strategic alliances? 3 reasons
> Improving current operations
> Creating a favourable environment
> Facilitating entry and exit
How can a firm improve current operations?
> Exploiting economies of scale (Why not independently?)
> Learning from competitors
- “US knowledge” “Lean manufacturing”
-Learning race (firms can underinvest, slow down learning of partner)
> Managing risk and sharing costs
Why would companies create a favourable competitive environment
> Setting technological standards in an industry
(Fax Machines, 1 is unusable)
(Convince customer to invest early)
> Facilitating collusion (Reducing supply, increasing prices)
- explicit (illegal)
-Tacit (sending signals)
Why engage? Facilitating entry and exit
> Avoiding high costs of creating skills
> Dispose of assets by reducing information asymmetry (Gives partner opportunity to observe how valuable asserts are)
> Manage uncertainty
-Alliances can be seen as options (invest in much small startups to buy them out.)
Close innovation
Research is all in the firm
Open innovation
Organisational boundaries will get transparant. (You cannot develop everything yourself these days)
Name three threats to alliance succes
> Adverse selection
Partners can misrepresent the skills or resources
> Moral Hazard
Partners fail to make the resources available to partners
> Holdup
Transaction specific investments
When does “adverse selection” occur?
Difficult or costly to observe resources of partners.
When does Moral hazard occur?
Change in market conditions
Three types of alliance governance mode
> Non- equity alliance
Equity alliance
Joint venture
Gulati and Singh
Alliances can be different from each other
Key succes factors of Alliances
Theory of Kale and Singh
Name 3 phases of the alliance life cycle of the Theory of Kale and Singh
> Alliance formation and Partner Selection
> Alliance Governance and design
> Postformation Alliance Management
What is a Merger?
Merger: a transaction where the assets of two similar sized firms are combined
