Week 6

Question 1

Strategic alliance

Answer 1

Independent firms cooperate to achieve competitive advantage

Question 2

Strategic alliance is most applicable when (9)

Answer 2

• Transaction costs of integrating is high compared to expected synergies
• In turbulent environments
• With high strategic uncertainty
• High disperson of knowledge
• If complementary resources are only short-term
• If it’s easy to protect competitive advantages from a partner
• Firms are financially weaker
• Firms have high absorptive capacity
• Firms have high social capital

Question 3

Acquisition

Answer 3

Taking control of a company by acquiring shares or property

Question 4

Acquisition is most attractive when (8)

Answer 4

• Danger of opportunistic behaviour is high
• High need for control
• In more predictable environments
• In case of high specifity
• High behavioural uncertainty
• High persistence of economic synergies
• If you can only protect competitive damage by high transaction costs
• When firms are financially stronger

Question 5

Greenfield investment

Answer 5

Setting up new ventures

Question 6

Greenfield investment most attractive when/because (6)

Answer 6

• Firm-specific advantages are deeply embedded into the firm’s labor force
• It is difficult to integrate a new unit into the acquirer’s business
• Cheaper to finance through debt or retained earnings
• Scale of US operation is relatively small
• Company produces a product it already produces in their homeland
• Greenfields are the most efficient way to transfer technological advantages

Question 7

Acquisition (vs Greenfield is most attractive when (

Answer 7

• Firm-specific advantages can be succesfully combined with going concern
• The targret firm represents a bargain for the acquirer
• The investor can leverage its firm-specific advantages more effectively
• If there is a maximum rate at which short of personnel is likely to be constrained in its ability to make greenfield investments
• When industries are characterized by very high of very low growth
• Followers are more likely to enter throug acquisitions than through greenfields

Question 8

Resource based view

Answer 8

Explains firms as bundles of resources and shifts the focus from cost- to value-consuderations

Question 9

Transaction cost view of firm

Answer 9

Minimizing transaction costs