Describe Nine Different Ways that Alliances can Create Value for Firms

Chapter 9

1) The use of strategic alliances to manage economic exchanges has grown substantially over the last several years.

Answer:

Diff: 1

Learning Obj.:  9.1: Define a Strategic Alliance and give Three Specific Examples of Strategic Alliances

AACSB:  Analytical Thinking

2) A strategic alliance exists whenever three or more independent organizations cooperate in the development, manufacture, or sale of products or services.

Answer:

Diff: 1

Learning Obj.:  9.1: Define a Strategic Alliance and give Three Specific Examples of Strategic Alliances

AACSB:  Analytical Thinking

3) In a nonequity alliance, firms create a legally independent firm in which they invest and from which they share any profits that are created.

Answer:

Diff: 2

Learning Obj.:  9.1: Define a Strategic Alliance and give Three Specific Examples of Strategic Alliances

AACSB:  Analytical Thinking

4) In an equity alliance, cooperating firms supplement contracts with equity holdings and alliance partners.

Answer:

Diff: 2

Learning Obj.:  9.1: Define a Strategic Alliance and give Three Specific Examples of Strategic Alliances

AACSB:  Analytical Thinking

5) When a firm cannot realize the cost savings from economies of scale all by itself, it may join in a strategic alliance with other firms so that together both firms will have sufficient volume to be able to gain the cost advantages of economies of scale.

Answer:

Diff: 2

Learning Obj.:  9.2: Describe Nine Different Ways that Alliances can Create Value for Firms and How These Nine Sources of Value can be Grouped into Three Large Categories

AACSB:  Analytical Thinking

6) In general, due to the intangible nature of knowledge, firms are not able to use alliances to learn from their competitors.

Answer:

Diff: 2

Learning Obj.:  9.2: Describe Nine Different Ways that Alliances can Create Value for Firms and How These Nine Sources of Value can be Grouped into Three Large Categories

AACSB:  Analytical Thinking

7) When both parties to an alliance are seeking to learn something from that alliance, a learning race can evolve.

Answer:

Diff: 2

Learning Obj.:  9.2: Describe Nine Different Ways that Alliances can Create Value for Firms and How These Nine Sources of Value can be Grouped into Three Large Categories

AACSB:  Analytical Thinking

8) Network industries are characterized by decreasing returns to scale.

Answer:

Diff: 2

Learning Obj.:  9.2: Describe Nine Different Ways that Alliances can Create Value for Firms and How These Nine Sources of Value can be Grouped into Three Large Categories

AACSB:  Analytical Thinking

9) Firms with high levels of absorptive capacity will learn at faster rates than firms with low levels of absorptive capacity, even if these two firms are trying to learn exactly the same things in an alliance.

Answer:

Diff: 2

Learning Obj.:  9.2: Describe Nine Different Ways that Alliances can Create Value for Firms and How These Nine Sources of Value can be Grouped into Three Large Categories

AACSB:  Analytical Thinking

10) Learning race dynamics are particularly common in relations among large, well-established firms.

Answer:

Diff: 2

Learning Obj.:  9.2: Describe Nine Different Ways that Alliances can Create Value for Firms and How These Nine Sources of Value can be Grouped into Three Large Categories

AACSB:  Analytical Thinking

11) In network industries with increasing returns to scale where standards are unimportant, strategic alliances can be used to create a more favorable competitive environment.

Answer:

Diff: 3

Learning Obj.:  9.2: Describe Nine Different Ways that Alliances can Create Value for Firms and How These Nine Sources of Value can be Grouped into Three Large Categories

AACSB:  Analytical Thinking

12) Explicit collusion exists when firms directly communicate with each other to coordinate their levels of production or their prices and is legal in most countries.

Answer:

Diff: 2

Learning Obj.:  9.2: Describe Nine Different Ways that Alliances can Create Value for Firms and How These Nine Sources of Value can be Grouped into Three Large Categories

AACSB:  Analytical Thinking

13) Tacit collusion exists when firms coordinate their pricing decisions not by directly communicating with each other but by exchanging signals with other firms about their intent to cooperate.

Answer:

Diff: 2

Learning Obj.:  9.2: Describe Nine Different Ways that Alliances can Create Value for Firms and How These Nine Sources of Value can be Grouped into Three Large Categories

AACSB:  Analytical Thinking

14) A learning race exists in a strategic alliance when both parties seek to learn from each other.

Answer:

Diff: 2

Learning Obj.:  9.2: Describe Nine Different Ways that Alliances can Create Value for Firms and How These Nine Sources of Value can be Grouped into Three Large Categories

AACSB:  Analytical Thinking

15) Research shows that joint ventures between firms in the same industry may have collusive implications and that these kinds of joint ventures are relatively common.

Answer:

Diff: 2

Learning Obj.:  9.2: Describe Nine Different Ways that Alliances can Create Value for Firms and How These Nine Sources of Value can be Grouped into Three Large Categories

AACSB:  Analytical Thinking

16) Alliances to facilitate entry into new industries are only valuable when the skills needed in these industries are complex and difficult to learn.

Answer:

Diff: 2

Learning Obj.:  9.2: Describe Nine Different Ways that Alliances can Create Value for Firms and How These Nine Sources of Value can be Grouped into Three Large Categories

AACSB:  Analytical Thinking

17) When information asymmetry exists between firms that currently own assets and firms that may want to purchase these assets, the selling firm will often have difficulty obtaining the full economic value of these assets.

Answer:

Diff: 2

Learning Obj.:  9.2: Describe Nine Different Ways that Alliances can Create Value for Firms and How These Nine Sources of Value can be Grouped into Three Large Categories

AACSB:  Analytical Thinking

18) In new and uncertain environments it is not unusual for firms to develop numerous strategic alliances.

Answer:

Diff: 2

Learning Obj.:  9.2: Describe Nine Different Ways that Alliances can Create Value for Firms and How These Nine Sources of Value can be Grouped into Three Large Categories

AACSB:  Analytical Thinking

19) Research shows that as many as two-thirds of strategic alliances do not meet the expectations of at least one alliance partner.

Answer:

Diff: 2

Learning Obj.:  9.3: Describe How Adverse Selection, Moral Hazard, and Holdup can Threaten the Ability of Alliances to Generate Value

AACSB:  Analytical Thinking

20) When potential cooperative partners misrepresent the skills, abilities, and other resources that they will bring to an alliance, this is a form of cheating known as adverse selection.

Answer:

Diff: 2

Learning Obj.:  9.3: Describe How Adverse Selection, Moral Hazard, and Holdup can Threaten the Ability of Alliances to Generate Value

AACSB:  Analytical Thinking

21) In general, the less tangible the resources and capabilities that are to be brought to a strategic alliance, the less costly it will be to estimate their value before an alliance is created and the more likely it is that adverse selection will occur.

Answer:

Diff: 2

Learning Obj.:  9.3: Describe How Adverse Selection, Moral Hazard, and Holdup can Threaten the Ability of Alliances to Generate Value

AACSB:  Analytical Thinking

22) Moral hazard occurs when partners in an alliance possess high-quality resources and capabilities of significant value in an alliance but fail to make those resources and capabilities available to alliance partners.