A non-equity cross-border alliance is an investment

vehicle in which profits and other responsibilities

are assigned to each party according to a contract.
Each party cooperates as a separate legal entity and
bears its own liabilities.

Equity mode involves a foreign direct investment in

purchasing of shares of a firm in a foreign country.

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 Equity and non-equity modes of foreign operation

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 In a merger, two companies become one, and one of the
companies often survives while the other disappears.

In a joint venture, two companies conspire to achieve a

specific goal, such as building a third company, working on an
outside project or marketing synergistic services. In a joint
venture, both companies remain separate and intact.

Acquisition, it is similar to a takeover, in which one company

takes over another.

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Figure
3-2
The formation processes of M&As and HR challenges

v IHRM Chapter 3 5
Coca-Cola acquired the Indian cola brand Thums Up

Tata Motors today acquired the Jaguar Land Rover business from the Ford
Motor Company

The Daimler-Benz merger with Chrysler in 1998 is probably the most famous
of all international mergers then ended in failure.

A successful example of cultural competence from the heavy industries is

that of the cooperation in joint venture form between the Russian company
Lukoil and their American partners ConocoPhillips.

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Typical cross-border M&A problems
1. Within first year of merger, up to 20% of
executives may be lost. Over a longer time
frame, this tends to increase even further.
2. Personnel issues are often neglected.
3. A high number of M&As fail or do not
produce the intended results.

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 Impact of the human integration and task acquisition
on acquisition outcome

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Figure
3-5
HR activities in the phases of a cross-border M&A

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Figure
3-6
Formation of an international equity joint venture

v IHRM Chapter 3 10
The main reasons for engaging in an IJV
1. To gain knowledge and to transfer that knowledge
2. Host government insistence
3. Increased economies of scale
4. To gain local knowledge
5. To obtain vital raw materials
6. To spread the risks (e.g. share financial risks)
7. To improve competitive advantage in the face of
increasing global competition
8. Provide a cost effective and efficient response
forced by the globalization of markets
v IHRM Chapter 3 11
Figure
3-7
IJV development stages and HR implications

v IHRM Chapter 3 12
 HR roles in IJV:

Partnership role – should take all the

stakeholders’ needs into consideration
Change facilitator - conceptualize and
implement change (OD, if needed)
Innovator – identifying talents to implement
IJV strategies
Collaborator – win-win situation for the
companies
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