What is the best strategy for finding success with mergers and alliances using an institution based view?

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• What is the main reason why formal institutions limit alliances and acquisitions in the areas of formal market entry modes?
• Which of the following is most closely aligned with the free market view of why a firm exists?
• Which of the following is a disadvantage of strategic alliances?

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Business Department, RISEBA University of Applied Sciences, Meža Street 3, LV-1048 Riga, Latvia

Academic Editor: Juan Manuel Ramon Jeronimo

Received: 29 April 2022 / Revised: 13 June 2022 / Accepted: 21 June 2022 / Published: 24 June 2022

Abstract

This paper aims to justify propositions that the dynamic political capabilities of collaborative partners to manage their institutional contexts are important drivers of collaborative synergies which can be valued by real options. To date, the institutional context of collaborative corporate strategies (strategic alliances, mergers, and acquisitions), particularly the analysis of the influence of government agencies on the synergies or unrealized synergies of collaborative ventures, remains unexplored. Moreover, the interdependence between the institutional dimensions of the collaborative strategies, the dynamic political capabilities of the collaborating partners, and collaborative synergies are needed to be integrated into new conceptual models and a new framework. This paper contributes to this request by providing a cohesive framework of micro-foundations with dynamic political capabilities and demonstrating an application of simple and compound sequentially combined real options for collaborative synergies’ valuation in the findings and discussion section. This paper makes several theoretical and empirical contributions to international business, strategic management, and corporate finance. The practical implication of the research is evidence that food retailers who want to grow with the latest consumer trends will need dynamic political capabilities to deal with the impact of an institutional context. Finally, this paper discusses research limitations and future work. View Full-Text

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This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

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MDPI and ACS Style

Čirjevskis, A. Valuing Collaborative Synergies with Real Options Application: From Dynamic Political Capabilities Perspective. J. Risk Financial Manag. 2022, 15, 281. https://doi.org/10.3390/jrfm15070281

AMA Style

Čirjevskis A. Valuing Collaborative Synergies with Real Options Application: From Dynamic Political Capabilities Perspective. Journal of Risk and Financial Management. 2022; 15(7):281. https://doi.org/10.3390/jrfm15070281

Chicago/Turabian Style

Čirjevskis, Andrejs. 2022. "Valuing Collaborative Synergies with Real Options Application: From Dynamic Political Capabilities Perspective" Journal of Risk and Financial Management 15, no. 7: 281. https://doi.org/10.3390/jrfm15070281

Note that from the first issue of 2016, MDPI journals use article numbers instead of page numbers. See further details here.

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the transfer of the control of operations and management from one firm (target) to another (acquirer), the former becoming a unit of the latter.

Contractual (non-equity-based) alliance

association between firms that is based on a contract and does not involve the sharing of ownership.

a business strategy in which each partner in an alliance holds stocks in the other firm.

associations between firms that are based on shared ownership or financial interest.

combination of operationsand management of two firms to establish a new legal entity

arevoluntary agreements of cooperation between firms.

a business strategy in which one firm invests in another.

difference between the acquisition price and the market value of target firms.

situation in which alliance partners aim to learn the other firm’s “tricks” as fast as possible.

the similarityin cultures, systems, and structures between two or more firms.

investment in real operations as opposed to financial capital.

Relational (or collaborative) capabilities

the ability to successfully manage interfirm relationships.

effective matching of complementary strategic capabilities.

party who beings the process of ending the alliance relationship.

is the other party in an alliance relationship.

exaggerated pride or overconfidence.

a manager’s desire for power, prestige, and money, which might lead to decisions that do not benefit the firm overall in the long run.

T/F
Entrepreneurship flourishes more in environments with more formal institutional procedures.

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Cultural values and norms are examples of informal institutions.

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The best performing entrepreneurs tend to have the most general knowledge about a host of business opportunities.

T/F
An institution-based view suggests that firm-specific resources and capabilities largely determine entrepreneurial success and failure.

T/F
Licensing is mostly used in the service industries.

T/F
Overall there are three core perspectives that shed light on a firms internationalization: the institution based view, the resource based view, and the liability of foreignness.

T/F
The motto of international business is location, location, location

T/F/
A first-mover advantage is the opportunity to free ride on first-mover investments

T/F
For non-equity modes, an advantage for direct exports is that economies of scale in production are concentrated in the home country

T/F
Having access to partners' knowledge and assets is an advantage for equity modes, such as joint ventures.

T/F
Indirect export is a strategy of exporting through domestically based export intermediaries.

T/F
There are three primary means to setting up a wholly owned subsidiary, including green-field operations, acquisitions, and joint ventures

T/F
Even if a firm does not fully succeed in the first steps of foreign market entry, there is still a good chance that it will be able to become a strong international player.

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Many firms establish alliances with competitors

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Formal government policies regarding entry mode requirements for new firms are generally becoming more conservative

T/F
It is important for managers to have collaborative relationship skills since alliances are more about collaboration than pure competition

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The main decision made during the first stage of alliance formation is whether growth can be achieved strictly through market transactions, acquisitions, or cooperative alliances.

T/F
Equity, learning and experience, relational capabilities, and organization are the four factors that may influence alliance performance.

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One strategy for successful managers is to value relational capabilities as much as equity and asset-heavy capabilities.

T/F
Organizational fit is slightly less important than strategic fit.

All of the following are resources and capabilities of start-up ventures EXCEPT: a. strong vision b. entrepreneurial drive c. leadership d. longstanding presence

The motto for international business is: a. beat the competition to the marketplace b. set strategic goals c. partner with local companies d. location, location, location

d. location, location, location 

What is the main reason why formal institutions limit alliances and acquisitions in the areas of formal market entry modes? a. many governments discourage acquisitions in order to establish local-only subsidiaries b. the liability of foreignness is guaranteed to make the alliances or acquisitions fail c. the governments are unable to tax acquisitions by foreign firms d. the institutions do not limit the firms in regards...

a. many governments discourage acquisitions in order to establish local-only subsidiaries

Why are M&A's and alliances often undertaken in isolation? a. firms combined mergers, acquisitions, and alliance departments are often poorly managed b. m&a's let a firm stay focused on its own needs c. in many firms, an m&a group reports to CFO while a separate unit deals with alliances d. an alliance usually satisfies shareholders of both organizations, precluding an acquisition

c. in many firms, an m&a group reports to CFO while a separate unit deals with alliances 

What is the best strategy for finding success with mergers and alliances, using an institution-based view? a. managers need to understand the rules of the game, including both regulation and the market environment b. managers need to pay attention to firms relational capabilities that often make or break relationships c. managers need to maintain a strong organizational structure

a. managers need to understand the rules of the game, including both legal regulation and the market environment 

How do institutions influence alliances and acquisitions?

-formal: through antitrust and entry mode concerns. -informal: through normative and cognitive pillars

How do resources influence alliances and acquisitions?

-VIRO framework -alliances and acquisitions must create value -the abilities to successfully manage interfirm relationships may be rare -may be difficult to replicate

When can imitability occur?

at a firm level or at the alliance level

Describe the stages in which alliances are formed:

1: whether to cooperate with another firm or to grow purely by market transactions 2: whether to use a contract or equity mode 3: specifying which type of relationship to pursue

How are alliances dissolved?

-initiation -going public -uncoupling -aftermath *managers need to combat opportunism and, if necessary, manage the dissolution process

What affects alliance performance?

-equity -learning -nationality -relational capabilities

What drives acquisitions?

-synergistic, hubristic, and/or managerial motives

What are some pre-acquisition problems?

-managers over-estimate their ability to create value, inadequate screening, poor strategic fit, lack of familiarity with foreign cultures, systems, or nationalistic concerns

What are some post-acquisition problems?

-poor organizational fit, failure to address multiple stakeholder groups' concerns, clashes of organizational cultures and/or national cultures, and nationalistic concerns

How to make global alliances and acquisitions successful:

-understand and master the rules of the game -pay attention to the soft relationship aspects -do not over-pay. focus on both strategic and organizational fit

What is the main reason why formal institutions limit alliances and acquisitions in the areas of formal market entry modes?

Which of the following is most closely aligned with the free market view of why a firm exists?

Which of the following is a disadvantage of strategic alliances?