Strategic Management 4e
4th Edition
ISBN: 9781260779646
Author: Frank T. Rothaermel
Publisher: Mc graw hill
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Question
Chapter 9, Problem 1DQ
Summary Introduction
To explain: The benefits and downsides of each mechanism.
Introduction:
Equity:
The alliance where there will be a purchase of equipment in the partner firm, or stake, or investment in the plant or equipment.
Non-equity:
The alliance will only deal with the licensing, supply or distribution agreements between the two firms.
Joint venture:
The company that is created by two or more parent firms together is known as a joint venture.
Expert Solution & Answer
Explanation of Solution
Non-Equity:
Benefits:
- It is flexible and fast.
- It is easy to begin or terminate.
Downsides:
- The alliance is weak.
- There will be a lack of trust and commitment.
Equity:
Benefits:
- The tie is stronger.
- It has more trust and commitment.
- It can look into new technologies.
Downsides:
- It has less flexibility.
- It is slower.
- It can entail significant investments.
Joint venture:
Benefits:
- It is the strongest alliance.
- It has more trust and commitment.
- It will require an institutional setting.
Downsides:
- It can entail longer investments and negotiations.
- The managers have to follow double reporting lines.
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