Making Alliances & Acquisitions Work - Chapter 12 T/F

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

True

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

True

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

True

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

True

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

True

The real options view gives the investor the levy of buying an option for initial investment, holding it until a decision point is arrived, and abandoning it if necessary.

True

The alliance dissolution is a four-step process.

True - INITIATION, GOING PUBLIC, UNCOUPLING, AFTERMATH

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

False - SYNERGISTIC adds value & HUBRIS and MANAGERIAL reduce value

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

True

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

False - INFORMAL INSTITUTION- BASED VIEW

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

False - INITIATION

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

True

Alliances preclude acquisitions.

False

Contractual alliances involve sharing of ownership.

False

Cross-border mergers are more common than acquisitions.

False

Every alliance or acquisition decision is driven by imitation.

False

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

False

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

False

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

False - Acquisition premium is the difference between the acquisition price and the market value of the TARGET firm.

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

False - Contractual (non-equity-based) alliances

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

False - IMPORTANCE IS HIGH

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

False - equity alliance relationships have more direct control

Licensing is a form of equity-based alliance.

False - form of contractual (non-equity-based) alliance

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

False - more intervention

The "O" in the VRIO framework indicates opportunity.

False - organization

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

False - potential motives for ACQUISITION

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

True

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

True

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

True

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

True

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

True

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

True

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

True

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.

True

Managers involved in alliances require collaborative relationship skills.

True