Deck 14: Joint Ventures and Strategic Alliances

Question 1

Chan, Kensinger, Keown, and Martin found positive abnormal returns from strategic alliances.

Answer 1

True

Question 2

Vertical mergers in the United States are not subject to review by the Justice Department.

Answer 2

False

Question 3

Woolridge and Snow's research on strategic investment decisions derived results that contradict those of McConnell and Nattell.

Answer 3

False

Question 4

One of the reasons why companies enter strategic alliances is to:

A) Jointly benefit from specific knowledge resources of one of the partners
B) Gain from a situation where a smaller partner possesses specific knowledge and expertise
C) Totally avoid antitrust conflicts
D) Both a and b
E) Both a and c

Question 5

Strategic alliances carry a lower probability of antitrust conflicts than M&As.

Question 6

The following are motives for joint ventures except for:

A) Enhance research and development capabilities
B) Gain access to key supplies
C) Enhance distribution systems
D) Enhance market share

Question 7

Johnson and Houston found that joint ventures were a favored alternative over contractual agreements when transaction costs were low.

Question 8

Strategic alliances are common in the pharmaceutical industry.

Question 9

Koh and Venkatraman found:

A) The positive shareholder wealth effects from joint venture announcements were greater for deals involving companies that were more related to each other
B) The smaller joint venture partner benefited more than the larger one
C) Contractual relationships yield greater benefits than joint ventures
D) Both a and b
E) Both b and c

Question 10

Research shows joint ventures have all but the following:

A) Lower costs of completing deal than M&As
B) Positive shareholder announcement effects
C) Lower takeover premiums
D) Lower likelihood of antitrust concerns

Question 11

McConnell and Nantell study showed that shareholders in companies entering into joint ventures enjoyed announcement period returns of -4%.

Question 12

Johnson and Houston found:

A) Positive announcement effects for horizontal joint ventures
B) Positive announcement effects for vertical joint ventures
C) Suppliers gained more than buyer in vertical deals
D) All the above
E) None of the above

Question 13

Which tends to have the lowest commitment level?

A) Strategic alliances
B) M&As
C) Joint ventures
D) Contractual agreements True or False Questions

Question 14

Chan, Kensinger, Keown, and Martin found significant transfers of wealth from alliance partners.

Question 15

The following factors should govern the allocation of control rights in joint ventures except for:

A) The degree to which there may be an underinvestment of either party that could have an adverse effect on the success of the alliance
B) The relative bargaining parties of the two partners
C) The extent to which one party may engage in opportunistic behavior, which can have an adverse effect on the outcomes
D) All the above
E) Both a and c

Question 16

Enhancing R&D is a common reason why companies form joint ventures.

Question 17

Answer: Research by Marciukaityte, Roskelley, and Wang found:

A) Positive announcement effects to the formation of alliances in the financial services industry
B) Alliances in the financial services industry showed improvements in operating performance relative to the industry
C) Alliance partners were more likely to enter into joint ventures or M&A with each other than randomly selected firms
D) All the above

Question 18

The following can be a reason why joint ventures may not succeed:

A) Disagreement among participants
B) Distrust among the participants
C) Payment of too high a takeover premium
D) All the above
E) Both a and b

Question 19

Answer: Das, Sen, and Sengupta showed that technological alliances were associated with greater announcement returns than marketing alliances.