Deck 14: Joint Ventures and Strategic Alliances

Question 1

One of the reasons why companies enter into 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

Answer 1

D

Question 2

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

Answer 2

False

Question 3

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

Answer 3

True

Question 4

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

Question 5

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

Question 6

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

Question 7

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 8

Which tends to have the lowest commitment level?

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

Question 9

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

Question 10

Research shows that:

A)Techno?logical alliances were more common in high-growth sectors
B)Marketing alliances were more common in mature industries
C)Abnormal returns were negatively correlated with both the size of the alliance partners and their profitability
D)Smaller and less profitable companies seem to have more to gain from strategic alliances
E)All of the above

Question 11

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 of the above

Question 12

Strategic alliances are common in the pharmaceutical industry.

Question 13

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

Question 14

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 of the above
E)Both a and c

Question 15

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 16

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

Question 17

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 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 of the above
E)Both a and b

Question 19

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 of the above
E)None of the above

Question 20

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