A(n) ________ exists whenever two or more independent organizations cooperate in the development, manufacture, or sale of products or services
vertical market
strategic alliance
initial public offering
market transaction
A ________ is a form of nonequity alliance that exists when one firm allows another to use its brand name to sell its products.
supply agreement
distribution agreement
licensing agreement
joint venture
In a ________, cooperating firms create a legally independent firm in which they invest and from which they share any profits that are created.
Strategic alliances can create economic value through helping firms improve their current operations by
facilitating the development of technology standards.
facilitating tacit collusion.
exploiting economies of scale.
managing uncertainty.
When both parties to an alliance are seeking to learn something from that alliance, a ________ can evolve.
learning race
dynamic race
learning dynamic
learning curve
Network industries are characterized by
increasing diseconomies of scale.
increasing returns to scale.
decreasing returns to scale.
decreasing economies of scale.
A firm's ability to learn is known as its
competitive position.
competitive advantage.
distinctive competence.
absorptive capacity.
________ exist(s) when firms directly communicate with each other to coordinate their levels of production and/or their prices.
Economies of scale
Explicit collusion
A learning race
Tacit collusion
________ exist(s) when firms coordinate their production and pricing decisions not by directly communicating with each other but by exchanging signals with other firms about their intent to cooperate.
Strategic alliances are particularly valuable in facilitating market entry and exit when the value of market entry or exit is
high
low
moderate
uncertain
Although joint ventures between firms in the same industry ________ collusive implications, research has shown that these kinds of joint ventures are ________.
may have; relatively rare
are not likely to have; relatively rare
may have; relatively common
are not likely to have; relatively common
As long as the cost of ________ to enter a new industry is less than the cost of ________, an alliance can be a valuable strategic opportunity.
vertically integrating; learning new skills and capabilities
learning new skills and capabilities; using an alliance
using an alliance; learning new skills and capabilities
learning new skills and capabilities; vertically integrating
Consistent with a real options perspective, firms in new and uncertain environments are likely to
avoid using strategic alliances.
develop numerous strategic alliances.
develop few strategic alliances.
engage in vertical integration.
If TeleCo were to enter into a strategic alliance with a partner that promised it could deliver a high quality wireless infrastructure when in fact the potential partner had neither the skills nor abilities to provide this infrastructure, TeleCo could be said to be impacted by
moral hazard.
adverse selection.
holdup
tacit collusion.
Adverse selection in a strategic alliance is likely only when
it is difficult or costly to observe the resources or capabilities that a partner brings to an alliance.
a potential partner can easily see the resources and capabilities that a firm is bringing to an alliance.
it is difficult or costly to know how competitors will react to the strategic alliance.
there are significant transaction-specific assets devoted to the alliance.
In general, the ________ tangible the resources and capabilities that are to be brought to a strategy alliance, the ________ costly it will be to estimate their value before an alliance is created, and the ________ likely it is that adverse selection will occur.
more; more; more
less; more; less
less; more; more
more; more; less
________ 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.
Moral hazard
Adverse selection
Holdup
Often both parties in a failed alliance accuse each other of
holdup.
When one firm makes more transaction-specific investments in a strategic alliance than partner firms make, that firm may be subject to a form of cheating called ________ that occurs when a firm that has not made significant transaction-specific investments demands returns from an alliance that are higher than what the partners agreed to when they created the alliance.
adverse selection
moral hazard
noncompliance
Research suggests that ________ are the type of alliance where existence of transaction-specific investments often leads to holdup problems.
licensing agreements
equity alliances
joint ventures
distribution agreements
The rarity of strategic alliances
depends solely on the number of competing firms that have already implemented an alliance.
depends solely on whether or not the benefits that firms obtain from their alliances are not common across firms in the industry.
depends not only on the number of competing firms that have already implemented an alliance but also on whether or not the benefits that firms obtain from their alliances are common across competing firms in the industry.
depends solely on the number of substitutes available for alliances.
One of the reasons why the benefits that accrue from a particular strategic alliance may be rare is that
relatively few firms may have the complementary resources and abilities needed to form an alliance.
there is a relatively large number of alliance partners available.
relatively many firms may have the complementary resources and abilities needed to form an alliance.
there may be a relatively low amount of transaction-specific assets to enter into similar alliances.
Research indicates that the most common reason that alliances fail to meet the expectations of partner firms is
the lack of financial resources.
the necessity of transaction-specific investments.
the lack of transaction-specific investments.
the partners' inability to trust one another.
To the extent that a strategic alliance is based on ________ relations, it will make the alliances costly to imitate.
socially complex
tacit collusion
explicit collusion
Two possible substitutes for strategic alliances include
going it alone and tacit collision.
going it alone and acquisitions.
acquisitions and explicit collusion.
explicit collusion and tacit collusion.
Firms ________ when they attempt to develop all the resources and capabilities they need to exploit market opportunities and neutralize market threats by themselves.
engage in tacit collusion
form joint ventures
go it alone
engage in explicit collusion
Alliances will be preferred to going it alone when
the level of transaction-specific investments required to complete an exchange is low.
there are no transaction-specific investments required to complete an exchange is low.
when there is low uncertainty about the future value of an exchange.
the level of transaction-specific investments required to complete an exchange is moderate
________ theory suggests that under conditions of high uncertainty, firms may be unwilling to commit to a particular course of action by engaging in an exchange with a firm and will choose, instead, the strategic flexibility associated with alliances.
Capabilities
Real options
Transaction cost economics
Resource-based
Alliances will be preferred to acquisitions when
alliances limit a firm's flexibility under conditions of high uncertainty.
there is minimal unwanted organizational "baggage" in an acquired firm.
there are legal constraints on acquisitions.
the value of a firm's resources and capabilities does not depend on its independence.
An example of a contractual clause that deals with operating issues would be a
noncompete clause.
minority protection clause.
put options clause.
termination clause.
All of the following are methods firms can use to reduce the threat of cheating in strategic alliances except
contracts.
equity investments.
joint ventures.
Which of the following is a limitation of the reputational control of cheating in a strategic alliance?
Subtle cheating in an alliance is likely to become public knowledge.
Even if one firm is clearly cheating in an alliance, the other firm may not be sufficiently tied into a network of firms to make this information public.
The effect of a tarnished reputation forecloses future opportunities for a firm and it helps reduce the current losses of the firm that was cheated.
The reputation of the firm that was impacted by the cheating may be impacted as significantly as the firm that committed the cheating.
When the probability of cheating in a cooperative relationship is greatest, a(n) ________ is the preferred form of cooperation.
equity agreement
________ may enable partners to explore exchange opportunities that they could not explore if only legal and economic organizing mechanisms were in place.
Trust
Joint ventures
Reputational effects
Equity investments
While it is often the case that there will be important information asymmetries between firms in an alliance, these asymmetries are likely to be ________ when alliances partners come from different countries.
much less
about the same as
much greater
marginally greater
eBay's agreement with the U.S. Postal Service is most accurately classified as a(n)
joint venture.
equity agreement.
licensing agreement.
nonequity agreement.
eBay's agreement with MBNA is most accurately characterized as a(n)
supply agreement.
equity alliance.
eBay's agreement with the Korean online auction company is best characterized as a(n)
eBay's former agreement with ecorp is best characterized as a(n)
nonequity alliance.
If eBay's agreements with their Korean and Australian partners were intended to increase the number of buyers and sellers and thereby increase the value of eBay's online auction services for every eBay user, this would imply that the online auction industry is an example of a ________ industry.
declining
network
commodity
mature
If eBay entered into the cooperative agreement with its Australian partner for the purpose of testing the attractiveness of the Australian and New Zealand auction industries prior to making a more significant investment in these industries, this would be an example of
transaction cost economics.
explicit collusion.
real options.
If, prior to entering the cooperative agreement with eBay, eBay's Korean partner stated that it had the technological capabilities to facilitate eBay's Korean auction business when, in fact, the Korean company did not have these capabilities, this would be an example of
If eBay's Australian partner agreed to provide marketing and technological skills to help eBay compete in the Australian and New Zealand auction industries but provided skills that were significantly lower than promised, this would be an example of
eBay's agreement with ________ is the most likely to be susceptible to holdup.
the Australian partner
the Korean partner
MBNA
the U.S. Postal Service
Which of the following reasons helps explain why eBay may have preferred to enter into an alliance to enter the Korean online auction industry rather than going it alone?
eBay's Korean partner possesses capabilities that are valuable and rare but not costly to imitate.
The level of transaction-specific investments required to enter the Korean online auction industry is low.
There is little uncertainty about the future of the Korean online auction industry.
The level of transaction-specific investments required to enter the Korean online auction industry is moderate.
