Strategic Management and Competitive Advantage, 4e (Barney)
Chapter 9 Strategic Alliances
1) The use of strategic alliances to manage economic exchanges has grown substantially over the
last several years.
2) A strategic alliance exists whenever three or more independent organizations cooperate in the
development, manufacture, or sale of products or services.
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.
4) In an equity alliance, cooperating firms supplement contracts with equity holdings an alliance
partners.
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.
6) In general, due to the intangible nature of knowledge, firms are not able to use alliances to
learn from their competitors.
7) When both parties to an alliance are seeking to learn something from that alliance, a learning
race can evolve.
8) Network industries are characterized by decreasing returns to scale.
9) Firms with high levels of absorptive capacity will learn at higher 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.
10) Learning race dynamics are particularly common in relations among large, well-established
firms.
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.
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.
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.
14) Strategic alliances can help create the social setting within which tacit collusion may
develop.
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.
16) Alliances to facilitate entry into new industries are only valuable when the skills needed in
these industries are complex and difficult to learn.
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.
18) In new and uncertain environments it is not unusual for firms to develop numerous strategic
alliances.
19) Research shows that as many as two-thirds of strategic alliances do not meet the expectations
of at least one alliance partner.
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.
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.
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.
23) The existence of moral hazard in a strategic alliance proves that at least one of the parties is
either malicious or dishonest.
24) In an alliance a holdup 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.
25) Research on international joint ventures suggests that the existence of transaction-specific
investments in their relationships makes these agreements relatively immune to holdup problems.
26) Although holdup is a form of cheating in strategic alliances, the threat of holdup can also be
a motivation for creating an alliance.
27) For a strategic alliance to be a source of sustained competitive advantage it must be valuable
in that it exploits an opportunity but avoids a threat and it must also be rare and costly to imitate.
28) The rarity of strategic alliances depends solely on the number of competing firms that have
already implemented an alliance.
29) In the short-run, firms can gain some advantages by cheating their alliance partners but
research suggests that cheating does not pay in the long run.
30) Successful strategic alliances are often based on socially complex relations among alliance
partners but virtually every firm in a given industry is likely to have the organizational and
relationship-building skills required for alliance building making the possibility of direct
duplication of strategic alliances very high.
31) In general, firms will prefer to go it alone rather than enter into a strategic alliance when the
level of transaction-specific investment required to complete an exchange is low.
32) Capabilities theory suggests that an alliance will be preferred over going it alone when an
exchange partner possesses valuable, rare, and costly-to-imitate resources and capabilities.
33) When there is low uncertainty about the future value of an exchange, an alliance will be
preferred to going it alone.
34) Transaction cost economics suggests that going it alone is not a substitute for strategic
alliances since they are best chosen only when other alternatives are not viable.
35) An alliance will be preferred to an acquisition when there are legal constraints on
acquisitions.
36) The primary purpose of organizing a strategic alliance is to enable partners in the alliance to
gain all the benefits associated with cooperation while minimizing the probability that
cooperating firms will cheat on their cooperative agreements.
37) In general, contracts are sufficient to resolve all the problems associated with cheating in an
alliance.
38) Sometimes the value of cheating in a joint venture is sufficiently large that a firm cheats even
though doing so hurts the joint venture and forecloses future opportunities.
39) In comparison to strategic alliances, joint ventures increase the threat of cheating by partners.
40) When the probability of cheating in a cooperative relationship is lowest, a joint venture is
usually the preferred form of cooperation.
41) In the computer technology-based industries, over ________ alliances were created between
2001 and 2005.
A) 5,700
B) 1,200
C) 2,200
D) 3,100
42) A(n) ________ exists whenever two or more independent organizations cooperate in the
development, manufacture, or sale of products or services.
A) vertical market
B) strategic alliance
C) initial public offering
D) market transaction
43) A ________ is a form of nonequity alliance that exists when one firm allows another to use
its brand name to sell its products.
A) supply agreement
B) distribution agreement
C) licensing agreement
D) joint venture
44) In a ________, cooperating firms create a legally independent firm in which they invest and
from which they share any profits that are created.
A) licensing agreement
B) supply agreement
C) distribution agreement
D) joint venture
45) Strategic alliances can create economic value through helping firms improve their current
operations by
A) facilitating the development of technology standards.
B) facilitating tacit collusion.
C) exploiting economies of scale.
D) managing uncertainty.
46) When both parties to an alliance are seeking to learn something from that alliance, a
________ can evolve.
A) learning race
B) dynamic race
C) learning dynamic
D) learning curve
47) Network industries are characterized by
A) increasing diseconomies of scale.
B) increasing returns to scale.
C) decreasing returns to scale.
D) decreasing economies of scale.
48) A firm’s ability to learn is known as its
A) competitive position.
B) competitive advantage.
C) distinctive competence.
D) absorptive capacity.
49) In one study almost ________ percent of the managers in entrepreneurial firms felt unfairly
exploited by their large-firm alliance partners.
A) 80
B) 20
C) 50
D) 10
50) ________ exists when firms directly communicate with each other to coordinate their levels
of production and/or their prices.
A) Economies of scale
B) Explicit collusion
C) A learning race
D) Tacit collusion
51) ________ exists 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.
A) Economies of scale
B) Explicit collusion
C) A learning race
D) Tacit collusion
52) Strategic alliances are particularly valuable in facilitating market entry and exit when the
value of market entry or exit is
A) high.
B) low.
C) moderate.
D) uncertain.
53) Although joint ventures between firms in the same industry ________ collusive implications,
research has shown that these kinds of joint ventures are ________.
A) may have; relatively rare
B) are not likely to have; relatively rare
C) may have; relatively common
D) are not likely to have; relatively common
54) 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.
A) vertically integrating; learning new skills and capabilities
B) learning new skills and capabilities; using an alliance
C) using an alliance; learning new skills and capabilities
D) learning new skills and capabilities; vertically integrating
55) Consistent with a real options perspective, firms in new and uncertain environments are
likely to
A) avoid using strategic alliances.
B) develop numerous strategic alliances.
C) develop few strategic alliances.
D) engage in vertical integration.
56) Research shows that as many as ________ of all strategic alliances do not meet the
expectations of at least one alliance partner.
A) one-third
B) five-eighths
C) one-half
D) two-thirds
57) 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
A) moral hazard.
B) adverse selection.
C) holdup.
D) tacit collusion.
58) Adverse selection in a strategic alliance is likely only when
A) it is difficult or costly to observe the resources or capabilities that a partner brings to an
alliance.
B) a potential partner can easily see the resources and capabilities that a firm is bringing to an
alliance.
C) it is difficult or costly to know how competitors will react to the strategic alliance.
D) there are significant transaction-specific assets devoted to the alliance.
59) 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.
A) more; more; more
B) less; more; less
C) less; more; more
D) more; more; less
60) ________ 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.
A) Moral hazard
B) Adverse selection
C) Holdup
D) Explicit collusion
61) Often both parties in a failed alliance accuse each other of
A) adverse selection.
B) tacit collusion.
C) moral hazard.
D) holdup.
62) 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.
A) adverse selection
B) holdup
C) moral hazard
D) noncompliance
63) Research suggests that ________ are the type of alliance where existence of transaction-
specific investments often leads to holdup problems.
A) licensing agreements
B) equity alliances
C) joint ventures
D) distribution agreements
64) The rarity of strategic alliances
A) depends solely on the number of competing firms that have already implemented an alliance.
B) depends solely on whether or not the benefits that firms obtain from their alliances are not
common across firms in the industry.
C) 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 not
common across competing firms in the industry.
D) depends solely on the number of substitutes available for alliances.
65) One of the reasons why the benefits that accrue from a particular strategic alliance may be
rare is that
A) relatively few firms may have the complementary resources and abilities needed to form an
alliance.
B) there is a relatively large number of alliance partners available.
C) relatively many firms may have the complementary resources and abilities needed to form an
alliance
D) there may be a relatively low amount of transaction-specific assets to enter into similar
alliances.
66) Research indicates that the most common reason that alliances fail to meet the expectations
of partner firms is
A) the lack of financial resources.
B) the necessity of transaction-specific investments.
C) the lack of transaction-specific investments.
D) the partners’ inability to trust one another.