END-OF-CHAPTER GUIDE
*Review Questions and Answers
*Critical Discussion Questions and Answers
*Global Action
*Closing Case
REVIEW QUESTIONS AND ANSWERS
1. List several examples of contractual alliances and several examples of equity-based
alliances.
In regards to the examples, the important thing is not so much the answer as the extent to
which the student demonstrates thought in providing the answer. Contractual
2. Are mergers or acquisitions more common? Why?
3. In what two primary areas do formal institutions affect alliances?
The impact of these formal institutions can be found along two dimensions: (1) antitrust
concerns and (2) entry mode requirements. First, many firms establish alliances with
4. Describe at least one norm (or collective assumption) and how it would affect a firm’s
perspective on creating an alliance.
The first set of informal institutions centers on collective norms supported by a normative
pillar. A core idea of the institution-based view is that because firms act to enhance or
Explain the three stages in the formation of an alliance.
Stage One: To Cooperate or Not to Cooperate? In Stage One, a firm must decide whether
Stage Two: Contract or Equity? A firm must decide whether to take a contract or an
5. Of the two methods allied firms can use to combat opportunism, which one do you think
is better? Why?
The important thing is not so much the answer as the extent to which the student
demonstrates thought in providing the answer. However, the following is relevant.
6. What happens when an alliance fails and must be terminated? Summarize the process.
7. Of the four factors that may influence alliance performance shown in Figure 12.6, which
do you think is the most important and which the least important? Why?
The four factors are Equity, Learning and Experience, Nationality, and Relational
9. ON CULTURE: How do dissimilarities in national culture affect the performance of
alliances?
10. Describe the three most common motives for acquisition.
Three drivers: (1) synergistic, (2) hubristic, and (3) managerial motives.
From an institution-based view, synergistic motives for acquisitions are often responses
From a resource-based standpoint, the most important synergistic rationale is to leverage
11. How does hubris affect value in a different way than the other two motives for
acquisition?
Hubris (over confidence in one’s capabilities) involves the managers of one firm taking
over another and, in essence, indicating that they are smarter than those currently
12. What are some criteria managers should consider to avoid pre- acquisition and
post-acquisition problems?
Pre-acquisition: Because of executive hubris and/or managerial motives, acquiring firms
may overpay targets and fall into a “synergy trap.” The high premium paid may be
13. ON CULTURE: What impact does the combination of organizational culture and
national culture have on cross-border M&As?
In cross-border M&As, integration difficulties may be much worse because clashes of
organizational cultures are compounded by clashes of national cultures. Example: If the
14. If you were part of a firm’s leadership team, under what conditions would you choose an
acquisition over an alliance, and vice versa?
Compared with acquisitions, alliances, despite their own problems, cost less and allow
15. When does a majority JV seem more appropriate, and when is a minority JV hold more
appealing?
Asserting one party’s control rights may irritate the other party. Local partners in JVs in
emerging economies especially resent the dominance of Western multinationals. A key
16. Identify a country or region on PengAtlas Map 3.1 in which it is relatively difficult to do
business. In spite of any difficulty, suppose you wish to expand into that country. Would
you expand through an acquisition or an alliance? Why?
Answers will vary. Some may prefer an alliance since it does provide access with less
17. In reference to PengAtlas Map 1.1, firms in which group of countries are most likely to
overpay for acquisitions in the other group of countries?
Firms in developed countries tend to be among the global giants and they are more likely
to be involved in acquisitions. Their past success could result in the hubris covered in
CRITICAL DISCUSSION QUESTIONS AND ANSWERS
1. Pick any recent announcement of a cross-border strategic alliance or acquisition. Predict
its likelihood of success or failure.
2. ON ETHICS: During the courtship and negotiation stages, managers often emphasize
“equal partnerships” and do not reveal (or even try to hide) their true intentions. What are
the ethical dilemmas here?
Managers may lie or deceive and use an “ends justify the means” rationalization for
3. ON ETHICS: As a CEO, you are trying to acquire a foreign firm. The size of your firm
will double, and it will become the largest in your industry. On the one hand, you are
excited about the opportunity to be a leading captain of industry and to attain the
associated power, prestige, and income. (You expect your salary, bonus, and stock option
to double next year). On the other hand, you have just read this chapter and are troubled
by the fact that 70% of M&As reportedly fail. How would you proceed?
The fact that 70% fail would suggest that one should forget about power and prestige and
GLOBAL ACTION
1. You are an entrepreneur in the cyber security industry seeking to develop alliances in
India. India has diverse regions with many different peoples, traditions, and levels of
economic development. Which two regions of India may be most conducive to
developing your entrepreneurial alliances? Why?
Exercise 1 Answers
One resource which can be used is “Global Entrepreneurship Monitor: National Reports”.
This website can be found by entering the search term “global entrepreneurship” at the
2. Identifying new sources of energy has been an important business opportunity for quite
some time. Your firm is interested in acquiring geothermal and solar energy firms around
the world that can offer the best growth potential. What are the top three countries with
strong firms in the geothermal and solar energy industry that you would recommend your
firm to look into?
Exercise 2 Answers
Several nations produce geothermal energy. To find information about these nations,
enter the search term “geothermal” at the globalEDGE™ Resource Desk search box
CLOSING CASE DISCUSSION GUIDE AND ANSWERS
EMERGING MARKETS: Emerging Acquirers from China and India
1. Why have M&As emerged as the primary mode of foreign market entry for Chinese and
Indian MNEs?
Given China’s prowess in manufacturing, Chinese firms’ overseas M&As primarily target
Drawing on the industry-based and resource-based views, outline the similarities and differences
between Chinese and Indian multinational acquirers.
From an institution-based view, the contrasts between the leading Chinese and Indian
acquirers are significant. The primary M&A players from China are state-owned
2. As CEO of a firm from either China or India engaging in a high-profile acquisition
overseas, shareholders at home are criticizing you of “squandering” their money, and
target firm management and unions—as well as host country government and the media
—are resisting. Should you proceed with the acquisition or consider abandoning the deal?
If you are considering abandoning the deal, under what conditions would you abandon it?