mgmt 352 mode of change alliance

mode of change/mode of entry key takeaway

to overcome the gap between current resources & changing environment, firms can choose among the following modes of change: build, borrow, buy

relevancy

how relevant are the firm’s existing internal resources to solving the resource gap?

tradability

if a resource is highly tradable, then the resource should be borrowed via a licensing agreement or other contractual agreement

closness

how close do you need to be yo your external resource partner?

post merger integration

key to a successful M&A

strategic alliances

voluntary arrangements between firms that involve sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services

mode of change

outside the firm boundaries, what options does a firm have to source new resources & capabilites

an alliance is a collaboration

between independent organizations, retaining strategic autonomy, committing resources to a joint activity

types of alliances

non-equity, equity, joint venture

why collaborate with someone else?

obtaining needed skills or resources more quickly, reducing asset commitment & increase flexibility, learning from partner

risks in undertaking cooperative agreements or strategic alliances

adverse selection (ex-ante contract), moral hazard (ex-post contract), holdup

adverse selection

partners misrepresent skills, ability & other resources

moral hazard

partners provide lower quality skills & abilities than they had promised

holdup

partners exploit the transaction specific investment made by others in the alliance