Deck 12: Making Alliances and Acquisitions Work

Question 1

Strategic investments in an equity-based alliance involve one partner investing in another.

Answer 1

True

Question 2

Cross-shareholding is based on financial interest between the firms.

Answer 2

True

Question 3

A joint venture (JV) is a form of equity-based alliance.

Answer 3

True

Question 4

The "O" in the VRIO framework indicates opportunity.

Question 5

The informal institution-based view that stresses the cognitive pillar is centered on the internalized taken-for-granted values and beliefs that guide firm behavior.

Question 6

Formal government policies regarding entry mode requirements are generally becoming more conservative.

Question 7

Antitrust authorities provide easy approvals for both alliances and acquisitions with less intervention.

Question 8

Mergers and acquisitions represent the largest proportion of foreign direct investment (FDI) flows.

Question 9

A real option enables the investor to buy an option for a small initial investment,hold it until a decision point arrives,and then exercise or abandon the option.

Question 10

Equity-based alliances include co-marketing,research and development,contracts,turnkey products,strategic suppliers,and strategic distributors.

Question 11

Managers involved in alliances require collaborative relationship skills.

Question 12

Cross-border mergers are more common than acquisitions.

Question 13

One of the disadvantages of having strategic alliances is potential partner opportunism.

Question 14

Alliances have emerged as great instruments of real options because of their flexibility to sequentially scale up or scale down investment.

Question 15

Acquisition premium is the difference between the acquisition price and the market value of the acquiring firm.

Question 16

The "imitability" of an alliance is based on the trust and understanding between the partners.

Question 17

Contractual alliances involve sharing of ownership.

Question 18

Every alliance or acquisition decision is driven by imitation.

Question 19

Licensing is a form of equity-based alliance.

Question 20

The formal institution-based view that drives mergers and alliances is based on the normative and cognitive pillars.

Question 21

The degree of tacitness is low in non-equity-based alliances.

Question 22

In the context of equity-based alliances,_____ involves both firms investing in each other.

A) strategic fit 
B) acquisition premium 
C) strategic investment 
D) cross-shareholding

Question 23

In the context of alliance formation,shared capabilities is one of the driving forces in deciding whether to take a contract or an equity approach.

Question 24

In the context of acquisitions,synergistic motives destroy value while hubris and managerial motives add value.

Question 25

Equity alliance relationships tend to have less direct control over joint activities on a continual basis than contractual relationships.

Question 26

The alliance dissolution is a four-step process.

Question 27

The more tacit the capabilities of a firm in an alliance,the greater the preference for equity involvement.

Question 28

A non-equity based alliance is also called a _____.

A) cross-border alliance 
B) synergistic alliance 
C) hubristic alliance 
D) contractual alliance

Question 29

Which of the following alliances is an equity-based alliance? 

A) Strategic investment 
B) Licensing 
C) Turnkey projects 
D) Co-marketing

Question 30

One way of combating opportunism in an alliance is to wall off critical capabilities.

Question 31

During the first stage of alliance formation,a firm decides whether growth can be achieved strictly through market transactions,acquisitions,or alliances.

Question 32

Importance of direct organizational monitoring and control is low in equity-based alliances.

Question 33

_____ are associations between firms that are based on contracts and do not involve the sharing of ownership.

A) Joint ventures 
B) Cross-shareholdings 
C) Non-equity based alliances 
D) Strategic investments

Question 34

Alliances preclude acquisitions.

Question 35

Alliances permit firms to sequentially increase their investment should they decide to pursue acquisitions.

Question 36

Which of the following alliances is a contractual alliance? 

A) Strategic investment 
B) Franchising 
C) Cross-shareholding 
D) Joint venture

Question 37

Equity,learning and experience,relational capabilities,and nationality are four factors that may influence alliance performance.

Question 38

Influence of formal institutions is low in both equity- and non-equity-based alliances.

Question 39

The three potential motives for alliances are synergistic,hubristic,and managerial motives.

Question 40

The first phase in an alliance dissolution is mediation by third parties.

Question 41

_____ alliances are based on ownership or financial interest between the firms.

A) Contractual 
B) Hubristic 
C) Equity-based 
D) Synergistic

Question 42

At stage 1 in the formation of an alliance,a firm must _____.

A) check the degree of tacitness 
B) evaluate institutional constraints 
C) decide whether growth can be achieved through market transactions 
D) choose between a contract or an equity approach

Question 43

At which stage in the formation of alliance must a firm decide whether to take a contract or an equity approach? 

A) Stage 1 
B) Stage 2 
C) Stage 3 
D) Stage 4

Question 44

A(n) ____ is the transfer of the control of operations and management from one firm to another with the former becoming a unit of the latter.

A) joint venture 
B) merger 
C) acquisition 
D) contractual alliance

Question 45

Who benefits the most from the acquisition premium valued during an acquisition? 

A) The shareholders of the acquiring firm 
B) The shareholders of the target firm 
C) The opportunistic partner 
D) The partner who possesses hard-to-imitate capabilities

Question 46

In an alliance,keeping critical skills and technologies not meant to be shared a secret helps prevent _____.

A) proxy fight 
B) corporate raider 
C) opportunism 
D) hostile takeover

Question 47

The institution-based view driving alliances and acquisitions focuses on _____ concerns.

A) value 
B) rarity 
C) learning by doing 
D) antitrust

Question 48

A(n) ____ is an investment in real operations as opposed to financial capital.

A) real account 
B) hubris 
C) real option 
D) foreign direct investment

Question 49

Pre-acquisition analysis often focuses on strategic fit,which is the effective matching of ____ strategic capabilities.

A) competitive 
B) complementary 
C) relational 
D) collaborative

Question 50

In which type of equity-based alliance does one firm invest in another? 

A) Hubristic investment 
B) Cross-shareholding 
C) Licensing 
D) Strategic investment

Question 51

In a non-equity-based alliance,which of the following should be high for possible upgrading to equity-based relationships? 

A) Degree of tacitness 
B) Importance of direct organizational monitoring and control 
C) Potential as real option 
D) Influence of formal institutions

Question 52

Which is the best-case scenario for a non-equity-based alliance? 

A) High tacitness and low influence of formal institutions 
B) Low potential as real options and low influence of formal institutions 
C) High tacitness and high importance of direct organizational monitoring and control 
D) Low tacitness and low importance of direct organizational monitoring and control

Question 53

The difference between the acquisition price and the market value of target firms is called _____.

A) acquisition equity 
B) acquisition cost 
C) acquisition value 
D) acquisition premium

Question 54

Which is the best-case scenario for an equity-based alliance? 

A) High tacitness and high importance to direct organizational monitoring and control 
B) Low potential as real options and low influence of formal institutions 
C) High tacitness and low influence of formal institutions 
D) Low tacitness and high importance to direct organizational monitoring and control

Question 55

The set of informal institutions that stresses the cognitive pillar lays emphasis on _____.

A) establishing wholly owned subsidiaries 
B) granting more liberal policies 
C) copying reputable organizations to ensure a low-cost way to gain legitimacy 
D) the internalized taken-for-granted values and beliefs that guide firm behavior

Question 56

The combination of operations and management of two firms to establish a new legal entity is called a(n) _____.

A) joint venture 
B) merger 
C) contractual alliance 
D) acquisition

Question 57

In the context of acquisitions,the similarity in cultures,systems,and structures between firms is called _____.

A) strategic fit 
B) acquisition premium 
C) organizational fit 
D) relational capability

Question 58

Which of the following is a disadvantage of alliances? 

A) Lack of learning race 
B) Partner opportunism 
C) Value as real options 
D) Scale up and scale down of investments

Question 59

The ability to successfully manage interfirm relationships is called _____.

A) hubristic capability 
B) synergistic capability 
C) contractual capability 
D) relational capability

Question 60

The act of investigating prior to signing contracts is called _____.

A) due diligence 
B) strategic fit 
C) relational capability 
D) hubristic motive

Question 61

Which is one of the four phases in an alliance dissolution? 

A) Imitation 
B) Going public 
C) Strategizing 
D) Opportunism

Question 62

One of the merits of alliances is to use them as real options.Elaborate.

Question 63

With respect to the motives for acquisition,_____ motives add value.

A) collusive 
B) hubristic 
C) managerial 
D) synergistic

Question 64

Which of the following motives for acquisition faces the resource-based issue of access to complementary resources? 

A) Collaborative 
B) Hubristic 
C) Managerial 
D) Synergistic

Question 65

Describe how partners in an alliance can combat opportunism.

Question 66

Discuss a few ways of improving the odds for acquisition success.

Question 67

Which of the following reasons for cross-border acquisition failure is associated with pre-acquisition? 

A) Failure to address multiple stakeholder groups' concerns 
B) Poor organizational fit 
C) Nationalistic concerns against foreign takeovers (political and media levels) 
D) Clashes of organizational cultures

Question 68

Elaborate on the institution-based view of alliances and acquisitions.

Question 69

Elaborate on the factors that may influence alliance performance.

Question 70

Describe the four driving forces that influence the choice of a contract or an equity approach in the formation of alliances.

Question 71

The second phase in an alliance dissolution is _____.

A) going public 
B) imitation 
C) strategizing 
D) uncoupling

Question 72

In the context of the motives for acquisition,from a resource-based view,the most important _____ rationale is to leverage superior resources.

A) managerial 
B) synergistic 
C) hubristic 
D) collusive

Question 73

Describe the stages in the formations of alliances.

Question 74

How does the VRIO framework affect acquisitions?

Question 75

Which of the following occurs in the uncoupling stage of an alliance dissolution? 

A) Last minute salvage 
B) New relationships 
C) Reconciliation 
D) Mediation by third parties

Question 76

____ refers to overconfidence in one's capabilities.

A) Hubris 
B) Fringe 
C) Decoupling 
D) Andon

Question 77

Which of the following stakeholders has the most concern over short-term revenue falling during mergers and acquisitions? 

A) Investors 
B) Top management 
C) Middle management 
D) Customers

Question 78

In the context of acquisitions,which of the following is a resource-based issue faced by synergistic motives? 

A) Herd behavior 
B) Enhancement of market power and scale economies 
C) Chasing fads of M&As 
D) Self-interested actions