Test Bank for Transnational Management Text and Cases in Cross-Border Management, 8th Editio

Test Bank for Transnational Management Text and

Cases in Cross-Border Management, 8th Edition
Christopher A. Bartlett Paul W. Beamish

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True/False

1. Entering collaborative relationships with other firms is one way for firms to meet the
needs of an increasingly complex environment.

Answer: True; In the international business environment of the 21st century, few
companies have all the resources and capabilities they need to develop multidimensional
strategies. Collaborating with other firms is one way to meet the needs of an increasingly
complex environment.
Difficulty: Easy
Page: 510
Topic: Why strategic alliances

2. Strategic alliances with customers are a form of collaboration that enable MNEs to
increase their bargaining power and reduce their costs.

Answer: False; Building partnerships with customers can bolster the customer’s
competitive position, and at the same time, leverages the competitiveness and innovative
capabilities of the MNE. It does not necessarily increase bargaining power or reduce
costs.
Difficulty: Easy
Page: 511
Topic: Why strategic alliances

3. Strategic alliances are only forged for long durations. Firms should not enter
collaborative agreements with a short-term horizon.

Answer: False; There is no optimal time frame for strategic alliances. The objectives of
the partners are often more important than the duration of the alliance. In fact, strategic
alliances are often forged only for short durations.
Difficulty: Easy
Page: 512
Topic: Why strategic alliances

4. Cross-border collaborations have become increasingly important. While the size of

an MNE’s corporate allies is extremely important to the MNE’s performance, the
quality of its corporate allies is only marginally important to the MNE’s
performance.

Answer: False; Choosing its allies is critical to the success of an alliance. In fact, the size
is only marginally important while quality and motivations are highly important.
Difficulty: Easy
Page: 513
Topic: Why strategic alliances

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5. Collaboration reduces the time and risk associated with the development of new
products.

Answer: True; By sharing assets and capabilities, firms can reduce the time and risk
associated with the development of new products
Difficulty: Easy
Page: 514
Topic: Why strategic alliances

6. Alliances are the only feasible way to develop a position in multiple countries and
regions.

Answer: False; While alliances provide many advantages, especially in entering new
markets, there are risks and costs associated with such collaboration. As such, companies
should always consider different alternatives and choose the one that is the most
convenient for their specific situation.
Difficulty: Easy
Page: 515
Topic: Why strategic alliances

7. The risks associated with collaboration are limited to the inability of both firms to
agree on the terms of the partnership.

Answer: False; The risks of collaborating with other firms may be important when it
involves competitors. As such, there is always the risk that one of the partners will learn
faster than the other partner, leading to the development of a competitive edge over the
other partner. Collaboration may also be a precursor for a takeover by the other partner,
or result in one partner trying to capture investment initiative to use the partnership to
erode the other’s competitive position. Despite these risks, such Machiavellian intentions
and actions are not the norm. In most instances, MNEs are able to resolve the risks and
costs of collaboration.
Difficulty: Easy
Page: 516
Topic: The risks and costs of collaboration

8. A vast majority of successful cross-border collaborations are founded and maintained

by firms that acquire the other partner’s knowledge without sharing their own
knowledge.

Answer: False; Successful cross-border collaborations are based on mutual collaboration

between the partners. As such, both partners must be willing to share their own
knowledge and to use it in the best interests of the partnership.
Difficulty: Easy
Page: 517
Topic: The risks and costs of collaboration

2
9. Once an alliance is formed, the goals, tasks and management processes of the
alliance must be constantly monitored and adapted to changing conditions.

Answer: True; Because alliances evolve and change over time, it is essential for both
partners to constantly monitor the alliance and adapt the goals, tasks and management
processes to changing conditions.
Difficulty: Moderate
Page: 518
Topic: The risks and costs of collaboration

10. Pre-alliance analysis is sufficient to ensure the success of a collaborative agreement.

Answer: False; Certainly the quality of the pre-alliance analysis is important. However,
many other factors also influence success. Solid pre-analysis activity is a necessary but
not sufficient condition for success.
Difficulty: Easy
Page: 519
Topic: Building and managing collaborative ventures

11. The objectives of an alliance are more difficult to achieve when there is a greater
number of joint activities, equity cross-holdings and cross-functional coordination.

Answer: True; The objectives of an alliance are more difficult to achieve and the
likelihood of problems arising is increased in the case of more complex alliances
characterized by a greater number of joint activities, the existence of equity cross-
holdings and the need for cross-functional coordination.
Difficulty: Easy
Page: 521
Topic: Building and managing collaborative ventures

12. Interface managers should be well acquainted with the company’s internal
organizational processes and should have access to key managers in different parts of
the organization.

Answer: True; The selection of appropriate interface managers is an important factor for
facilitating learning and knowledge flow in an alliance. Interface managers should have
at least three key attributes: they must be well versed in the company’s internal
organizational process; they must have the personal credibility and status necessary to
access key managers in different parts of the organization; and they must have a
sufficiently broad understanding of the company’s business and strategies to be able to
recognize useful information and knowledge that might cross their path.
Difficulty: Easy
Page: 522
Topic: Building and managing collaborative ventures

3
13. Equality between partners is essential, regardless of the governance structure.

Answer: False; Committees consisting of an equal number of participants from both

companies and operating under strict norms of equality are often incapable of providing
clear direction or resolving conflict at lower levels. To find their way around such
problems, partners must negotiate on the basis of “integrative” rather than “distributive”
equality, with each company taking responsibility for different tasks.
Difficulty: Easy
Page: 523
Topic: Building and managing collaborative ventures

14. Formulating an agreement with respect to the termination of the venture at the outset
of the collaboration demonstrates that the partners are not fully dedicated to the
success of the alliance.

Answer: False; The dissolution of a partnership is not necessarily synonymous with

failure. In order to manage possible eventual termination successfully, it is reasonable to
discuss up front with the other partner the rights and responsibilities of each should this
occur.
Difficulty: Moderate
Page: 523
Topic: Engaging in cross-border collaboration

Multiple Choice

15. Which of the following is not a benefit of a strategic alliance?

a. Firms can transfer their technologies to new markets and increase their revenues
from licensing fees.
b. Firms can transfer employees to other organizations to reduce operating costs and
acquire new knowledge through the employees they transfer.
c. Firms can gain access to new markets for existing products and learn important new
skills from the partner.
d. Firms can share costs and develop new technologies together without being fully
integrated.

Answer: b; There are many benefits to strategic alliances, such as risk sharing, transfer of
technologies, access to new markets, acquisition of knowledge, etc. However,
transferring employees to reduce operating costs is not one of these benefits.
Difficulty: Easy
Page: 512
Topic: Why strategic alliances

16. A car manufacturer and a multinational computer technology corporation intend to

combine their strengths to develop intelligent sound systems for cars. Assuming that

4
 both companies will have a moderate to high level of interaction, what would be the
most suitable form of alliance to adopt?
a. The firms should develop an R&D consortium, combining teams from both
companies.
b. The firms should create an equity joint venture, combining assets from both
companies.
c. The firms should create a licensing agreement to exploit the new application.
d. The firms should develop production facilities to be shared between the partners.

Answer: a; An R&D consortium would combine teams from both companies to develop
new technologies or applications of technologies. In this case, the objective of the
collaboration is to develop a new application for a technology that could be used in a car.
Because of the short product life cycle, and the limited market window for the
application, an R&D partnership can help resolve the different challenges both companies
would independently encounter in developing this new product and introducing it in cars.
Difficulty: Moderate
Page: 514
Topic: Why strategic alliances

17. Oil & Gas Limited and Small Tech Inc. announced an agreement to develop a new
technology for the extraction of gas. Oil & Gas Limited will contribute financial
resources and its expertise in gas extraction, while Small Tech will provide its
expertise in R&D. To ensure the success of the collaboration, prior to the alliance,
both companies should
a. approach prospective clients to get their perspective on the agreement and ensure that
there is a market for the new technology they want to develop.
b. verify the prospective partner’s capabilities and assess its strengths and weaknesses.
c. adopt a code of conduct that will clarify the responsibilities of each partner and the
ethical behavior that will be expected of each partner.
d. agree on the expected revenues and profit sharing.

Answer: b; At the very early stage of an alliance, it is essential for both partners to do a
pre-alliance analysis. This step includes the assessment of the partner’s strengths and
weaknesses, and discussions to determine if there is a fit in terms of goals and
expectations. If b is successfully resolved, they could then move to d.

Difficulty: Moderate
Page: 519
Topic: Building and managing collaborative ventures

18. Robert is an operating manager for a large organization. Robert’s organization will
be engaging in a joint venture. He has been assigned the responsibility of overseeing
his firm’s participation in the joint venture. As such, Robert’s supervisor has asked
him to participate in the negotiation process. Even if Robert is not familiar with the
negotiations, his presence at this stage is essential to

5
a. ensure that the definition and understanding of the alliance’s goals are clear and
consistent
b. give the joint venture partner an opportunity to accept or reject Robert’s leadership
of his firm’s participation in the partnership.
c. communicate Robert’s extensive familiarity with his own firm to the joint venture
partner.
d. make him feel important and test his capacity to operate in a stressful situation.

Answer: a; Involving the interface manager in the negotiation process is important since
he need to fully understand the goals of the alliance, its mechanisms and the scope of the
partnership to be effective in his task. This also ensures that the definition and
understanding of the alliance’s goals are clear, consistent, and well understood.
Difficulty: Moderate
Page: 520
Topic: Building and managing collaborative ventures

19. When the alliance’s tasks are characterized by extensive functional

interdependencies
a. it is preferable to have a dominant partner that can assume the functional tasks.
b. it is preferable to merge both companies.
c. the development of clear operating rules is the only way to maintain boundaries
between the functions.
d. the creation of a separate entity is the most effective way to manage the linkages
between the various functions.

Answer: d; When the alliance’s tasks are characterized by extensive functional

interdependencies, there is a need for a high level of integration in the decision-making
process related to those shared tasks. In such circumstances, the creation of a separate
entity is often the only effective way to manage such dense interlinkages. In contrast, an
alliance between two companies with the objective of marketing each other’s existing
products may need only a few simple rules and a single joint committee to review the
outcomes periodically.
Difficulty: Moderate
Page: 521
Topic: Building and managing collaborative ventures

20. Which of the following can inhibit a firm’s ability to learn from the alliance?
a. The interface manager is not the target user of the knowledge.
b. The firm does not have an information system to diffuse the knowledge acquired.
c. The firm does not share its knowledge with the other partner.
d. The alliance knowledge is not codified.

Answer: a; Irrespective of the specific objectives of any alliance, the very process of
collaboration creates flows of information across the boundaries of the participating
companies and creates the potential for learning from each other. One task related to
knowledge flows in the alliance is to ensure full exploitation of the created learning

6
potential. Relative to this task, the key problem is that the individuals managing the
interface may not be the target users of such knowledge. To maximize its learning from a
partnership, a company must effectively integrate its interface managers into the rest of
its organization.
Difficulty: Easy
Page: 522
Topic: Building and managing collaborative ventures

21. An effective interface manager is someone who

a. is very competent in the dominant functional area of the venture.
b. has a good understanding of the strategy of the firm and can advise the other partner
of this strategy.
c. can influence the goals and objectives of the alliance for the benefit of his/her
organization.
d. is the best user of the information / knowledge and can diffuse it to the right people
within the organization.

Answer: d; Interface managers should have at least three key attributes: they must be well
versed in the company’s internal organizational process; they must have the personal
credibility and status necessary to access key managers in different parts of the
organization; and they must have a sufficiently broad understanding of the company’s
business and strategies to be able to recognize useful information and knowledge that
might cross their path.
Difficulty: Moderate
Page: 522
Topic: Building and managing collaborative ventures

22. The negotiation of an integrative equality agreement implies that

a. each committee in the alliance is structured with clear, co-shared leadership, but each
company takes responsibility for different tasks.
b. each committee in the alliance is structured with clear, single-handed leadership, but
tasks are developed internally within the joint venture.
c. each committee in the alliance is structured with clear, single-handed leadership, but
each company takes responsibility for different tasks.
d. each committee in the alliance is structured with clear, co-shared leadership, but
tasks are developed internally within the joint venture.

Answer: c; The negotiation of an integrative equality agreement should lead to the

creation of different committees where each committee is structured with clear, single-
handed leadership, but each company takes the responsibility for different tasks.
However, such deliberately balanced arrangements can work only if the partners can
agree on specific individuals, and protect their ability to work in the best interests of the
alliance itself rather than those of the parents.
Difficulty: Hard
Page: 523
Topic: Building and managing collaborative ventures

7
23. In an alliance, the success of an integrative equality agreement requires
a. the delegation of authority to individuals chosen by both partners.
b. the dispersal of decision-making on select issues to at least one of the partners.
c. the development of a code of conduct for conflict resolution.
d. the selection of individuals that report to both alliance partners.

Answer: a; Even if the responsibilities for specific aspects of alliance management in an

integrative agreement are divided between the partners, it is important for them to reach a
common agreement on the important decisions of the alliance. This includes the choice of
the individuals in position of authority, since these individuals are often the key to the
success of the partnership.

Difficulty: Hard
Page: 523
Topic: Building and managing collaborative ventures

24. Most stable alliances often involve

a. two partners that are both motivated to acquire each other’s knowledge.
b. two partners that are each satisfied with access to, rather than the acquisition of, each
other’s knowledge.
c. two partners providing resources that are significantly different.
d. one partner that is strong enough to dominate the other partner.

Answer: b; Stable alliances involve partners that are each satisfied with access to (rather
than acquisition of) each other’s knowledge. It is not a race to try and steal the other
partner’s knowledge. It is recognizing that each partner is bringing unique contributions
to the alliance, contributions which are likely of a long term and significant nature.
Difficulty: Hard
Page: 524
Topic: Building and managing collaborative ventures

Essay

25. Allan is the CEO of a large corporation that wants to partner with a competitor to
develop a new technology. Explain the potential risks that Allan’s company may
encounter by collaborating with a rival.

Answer:

The most common risk associated with collaborating with competitors is the possibility
that one of the venture partners will use the other partner’s knowledge to develop a
competitive edge. Alternatively, the benefits resulting from the partnership may be
asymmetrical, leading to a change in the relative competitive positions of the firms. This
asymmetry may be the result of the motivation or incapacity of one partner to learn from

8
the other. Other risks include the externalization of learning by sharing tasks and the risk
that the partnership is a precursor to a takeover by one of the partners.

Difficulty: Moderate
Page: 516
Topic: The risks and costs of collaboration

26. Sunny is the CEO of a large corporation that wants to enter a partnership with
another organization. What should Sunny consider when choosing his partner?

Answer:
First, Sunny should conduct research on his partner - collecting data with respect to the
partner’s relevant tangible assets, intangible assets and organizational capabilities.
Previous dealings between these companies can be a valuable source of information, in
addition to helping assess the strengths and weaknesses of the partner and the level of
comfort in collaborating with each other. Second, Sunny should meet with the
prospective partner to try to learn more about the partner’s strategic objectives and to
identify any differences with respect to expectations as they relate to the alliance. An
ideal partner is one that is both competent and with whom the firm is comfortable
working.

Difficulty: Moderate
Page: 519
Topic: Building and managing collaborative ventures

27. A firm is entering a strategic alliance and the CEO is worried about managing the
firm’s boundaries. What would you recommend to the firm and why?

Answer:
An effective way to manage firm boundaries is to create an independent legal entity to
engage in the strategic alliance. This would ensure that the assets of the firm are not
directly mixed with the assets of the alliance partner and it would clearly delineate any
resources that are included in the partnership. To guard against the risk of the proprietary
firm information leaking out of the alliance, managers must clearly categorize
information as either confidential or free to share. Alternatively, a firm might start with a
more limited alliance agreement and then choose to expand the scope of the agreement if
the alliance proceeds successfully.

Difficulty: Hard
Page: 521
Topic: Building and managing collaborative ventures

9
Test Bank for Transnational Management Text and Cases in Cross-Border Management, 8th Editio

28. Managing knowledge flow is important for a firm that wants to get the most from its
partnership with another company. What can a firm do to ensure it gets the most
from its collaboration while preventing the outflow of information they do not wish
to share with their alliance partner?

Answer:
The process of collaboration creates a flow of information across the boundaries of the
participating companies and creates the potential of learning from each other. To
maximize its learning from a partnership, a firm effectively integrates its interface
managers into the rest of its organization. Selecting the right interface managers is one of
the keys of such learning. Supportive administrative processes also must be developed to
facilitate the systematic transfer of information and monitor the effectiveness of those
transfers. While exploiting the alliance’s learning potential, however, each company must
also manage the interface to prevent an unintended flow of information to its partner.
This delicate task is the responsibility of the gatekeepers, who need to ensure that
sensitive or proprietary knowledge is appropriately protected.

Difficulty: Hard
Page: 522
Topic: Building and managing collaborative ventures

29. Flexibility is often the key in a strategic alliance. Please comment.

Answer:
The original agreement for a partnership typically is based on limited information and
perhaps unrealistic expectations. Experience gained from the actual process of working
together provides the opportunity for fine-tuning and often finding better ways to achieve
higher levels of joint value creation. In such circumstances, the flexibility to adapt the
goals, scope, and management of the alliance to changing conditions is essential. In
addition, changing environmental conditions may make original intentions and plans
obsolete. Effective partnering requires the ability to monitor such changes and allow the
partnership to evolve in response.

Difficulty: Moderate
Page: 524
Topic: Concluding Comments

10

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