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Book part
Publication date: 22 November 2012

Valerie Moatti and Pierre Dussauge

Though alliances and mergers and acquisitions (M&A) are both extensively used by companies seeking to achieve the benefits of greater size and scale, strategy research has rarely…

Abstract

Though alliances and mergers and acquisitions (M&A) are both extensively used by companies seeking to achieve the benefits of greater size and scale, strategy research has rarely examined these two moves as alternative courses of action. Indeed, the size-performance relationship has long been a major research topic both in industrial organization and in strategy. In the late 1960s, it has given rise to such famous strategy concepts as the so-called “experience curve”, but has since generated only limited interest. More recently, much research has been devoted to examining mergers and acquisitions on the one hand, and inter-firm alliances on the other hand. Both these moves significantly affect a firm's scale and are thus likely to have an impact on performance. However, the work on M&A or on alliances very rarely compares these different modes of growth to one another in their ability to deliver scale benefits. Our research specifically aims at analyzing the relative scale effects achieved when growing through either M&A or alliance, using organic growth as a baseline scenario. In this chapter we develop arguments on the relative impact of these two alternative modes of growth in terms of economies of scale, bargaining power, and overall performance effects. Our empirical analysis of the global retailing industry (through a sample of 82 firms observed between 1984 and early 2000s) reveals that M&A enhance bargaining power, while alliances fail to deliver the expected benefits.

Details

Advances in Mergers and Acquisitions
Type: Book
ISBN: 978-1-78190-460-2

Keywords

Article
Publication date: 15 July 2020

Andrea Cardoni, George H. (Jody) Tompson, Michele Rubino and Paolo Taticchi

The purpose of this paper is to analyze three characteristics of strategic alliances in Italy to estimate their influence on financial performance. The authors test how alliance

Abstract

Purpose

The purpose of this paper is to analyze three characteristics of strategic alliances in Italy to estimate their influence on financial performance. The authors test how alliance complexity, strategic planning and accounting control influence revenue growth, asset growth and EBITDA margin.

Design/methodology/approach

This paper uses contractual and financial data to test hypothesized relationships in structural equation modelling (SEM) using partial least squares (PLSs).

Findings

This paper highlights that the extent of strategic planning positively influences the growth in assets but not in revenue or EBITDA margin. In addition, the findings of this paper support the idea that the complexity in the alliance is significantly related to the quantity of accounting controls within alliance.

Originality/value

This paper improves existing research on the subject, as it contributes to open the black box of alliances’ internal operations by examining the details of 50 Italian contracts to create a multidimensional profile of each alliance.

Details

Measuring Business Excellence, vol. 24 no. 4
Type: Research Article
ISSN: 1368-3047

Keywords

Article
Publication date: 27 May 2014

Marta Ortiz-de-Urbina-Criado, Luis Ángel Guerras-Martín and Ángeles Montoro-Sánchez

The purpose of this paper is to investigate the effect of a firm's growth strategy (specialization and diversification) and its specific resources, such as intangible assets and…

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Abstract

Purpose

The purpose of this paper is to investigate the effect of a firm's growth strategy (specialization and diversification) and its specific resources, such as intangible assets and previous experience in the choice of growth method (organic or external).

Design-methodology-approach

The paper analyses 859 external growth arrangements and 1,057 cases of organic growth. A binomial logistic regression is used to test the hypotheses.

Findings

Results show that firms prefer to grow internally when their growth strategy is specialization, but prefer external growth methods – such as mergers, acquisitions and alliances – when their growth strategy is diversification and they have previous experience in these methods.

Research limitations-implications

This study applies only to the European case and could be extended to Latin American companies for a comparative analysis.

Practical implications

This paper may help managers to identify important factors and issues to be considered when deciding upon a growth method. The European experience can be useful for Latin American companies following a similar growth strategy.

Originality-value

The results confirm a large part of the prior literature, but also go a stage further by including in the same study all the growth options available to a firm and providing empirical evidence of each one's preference according to the different situations analysed.

Details

Academia Revista Latinoamericana de Administración, vol. 27 no. 1
Type: Research Article
ISSN: 1012-8255

Keywords

Article
Publication date: 1 October 2005

Larraine Segil

To show how the key to successfully managing alliances is developing and implementing alliance metrics.

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Abstract

Purpose

To show how the key to successfully managing alliances is developing and implementing alliance metrics.

Design/methodology/approach

The case of “Acme Manufacturing” (a composite of several firms) is used to illustrate the theory and reasoning behind the creation and tracking of alliance metrics appropriate to the life cycle of the partnership. These ideas are then applied to the ongoing Avnet/HP alliance.

Findings

Understanding and applying unique metrics at each stage allows management to anticipate alliance challenges and increase flexibility and adaptability when faced with changing economic and market conditions. Across the life cycle stages the partners must learn to monitor two types of measurements – development metrics, commonly employed in the start‐up and high growth stages, and implementation metrics, engaged throughout the professional, mature, decline, and sustain stages of the life cycle.

Research limitations/implications

This is a case study produced by a consultant specializing in alliance management. It has been peer reviewed but has not been subjected to independent audit.

Practical implications

Proactively managing alliances helps partners ensure value extraction, financial and non‐financial. Development metrics and implementation metrics can help alliance stakeholders understand and plan for the stages of the alliance life cycle while considering their knowledge transfer.

Originality/value

As the cases of Acme Manufacturing and Avnet/HP show, an understanding of alliance life cycles, cultures, and metrics can lead to successful planning, launching, and maintenance of a company's alliances.

Details

Strategy & Leadership, vol. 33 no. 5
Type: Research Article
ISSN: 1087-8572

Keywords

Article
Publication date: 6 May 2014

Monal Adel Abdel-Baki

The Egyptian banking sector has acted as an arena for multiple alliances, some of which bred crony capitalism and others acted as growth alliances. The purpose of this paper is to…

Abstract

Purpose

The Egyptian banking sector has acted as an arena for multiple alliances, some of which bred crony capitalism and others acted as growth alliances. The purpose of this paper is to examine the effect of private sector advocacy in the Egyptian banking sector on macroeconomic performance, with the prime aim of designing an Egyptian-centric roadmap outlining precepts of good advocacy between bankers, policymakers and businesses.

Design/methodology/approach

The study uses a two-stage model. In the first stage an advocacy construct is developed using confirmatory factor analysis. In the second stage the relationship between advocacy and macroeconomic growth is measured by running a set of parsimonious regressions.

Findings

The empirical results show a strong relationship between advocacy and growth, albeit not on inflation rates, suggesting that an innovative set of public policy instruments is needed to promote private advocacy efforts and to institutionalise private-public partnerships. This is an innately pressing mission for the new government to mitigate the impact of the double-digit inflation that has prevailed since the Triple-F – food, fuel and finance – Crisis of 2006.

Practical implications

The ousted Egyptian government failed to protect its citizens from crony alliances and corruption, be it abuse of public resources or unfair access to bank credit. Hence, the prime aim is to design a future roadmap for the endorsement of effective growth alliances between businesses, bankers and policymakers. The recommendations proposed by this study would prove helpful to future public policymakers in the fulfilment of the macroeconomic aspirations of the Egyptian society as well as to other emerging and developing nations that share similar problems.

Social implications

The research addresses how reforms can be designed in an egalitarian fashion to direct credit to growth enhancing and job-generating sectors since a prompt treatment of these problems at their roots is apt to minimise the probabilities of future social turmoil. This is apt to assist the Egyptian people to transition to a truly democratic society and to convert street rebellions into inclusive institutional activism.

Originality/value

This paper adds to the literature a measurable construct gauging the relationship between advocacy in the banking sector and growth. Another contribution is the set of policies proposed to institutionalise rightful advocacy efforts.

Details

International Journal of Public Sector Management, vol. 27 no. 4
Type: Research Article
ISSN: 0951-3558

Keywords

Book part
Publication date: 25 January 2021

Desalegn Abraha and Akmal S. Hyder

In this chapter, each case is analyzed in phases to reflect on the development of the business process between Swedish firms and local partners from the transitional emerging…

Abstract

In this chapter, each case is analyzed in phases to reflect on the development of the business process between Swedish firms and local partners from the transitional emerging economies. Initially 20 cases were studied but the final number was 10 cases as other alliances or their continuation in some other forms cannot be traced. Transformation of the alliances shows how the partners have gained experience and grown over the years. Out of the 10 cases, three phases in eight of the cases can be identified. Only two phases are found in the remaining two cases. The analysis is done in such a way that cases can be compared in terms of the variables of the conceptual framework, which includes motives, resources, learning, network, performance, and business environment prevailing in the case countries. The analysis is in two steps: first, each case is discussed in different phases and second, all cases are compared together, also in separate phases. The result of the analysis is the starting point of the next chapter where general findings are discussed and related to the relevant literature.

Details

Transformation of Strategic Alliances in Emerging Markets, Volume II
Type: Book
ISBN: 978-1-80043-748-7

Book part
Publication date: 4 August 2015

Fabiana Moreno and Alex Coad

High-growth firms (HGFs) make a considerable contribution to economic growth, and in recent years they have received increasing interest from entrepreneurship scholars. By…

Abstract

High-growth firms (HGFs) make a considerable contribution to economic growth, and in recent years they have received increasing interest from entrepreneurship scholars. By analysing recent findings in the literature of high-growth firms, this study identifies some Stylized Facts, as well as contradictory findings, and also some unknowns regarding the determinants and internal strategies of HGFs, particularly on the persistence of their superior growth performance and the implications of recent findings for economic policy.

Details

Entrepreneurial Growth: Individual, Firm, and Region
Type: Book
ISBN: 978-1-78560-047-0

Keywords

Article
Publication date: 27 August 2019

Malika Chaudhuri, Jay Janney and Roger J. Calantone

March’s 1991 work on exploitation and exploration has been studied in many different industries. The purpose of this paper is to analyze signals emanating from exploration and…

Abstract

Purpose

March’s 1991 work on exploitation and exploration has been studied in many different industries. The purpose of this paper is to analyze signals emanating from exploration and exploitation alliances within the pharmaceutical industry context. Specifically, the authors explore market reactions to announcements of alliance formations based not only on alliance type but also in terms of their marketing intensity and leverage.

Design/methodology/approach

The authors employ a two-stage event-study market model using a two-day event window (event days 0, +1), creating cumulative abnormal returns (CARs). In the second stage, the authors regress the CARs against an array of control and explanatory variables.

Findings

Findings suggest that even though firm announcements of exploration and exploitation formations initially generate favorable market reactions, the former has a greater impact on CAR relative to the latter. Furthermore, leverage and marketing intensity moderate the relationship between firms’ alliance formation announcements and CARs generated. In particular, firms’ alliance formation announcements generate relatively greater market reactions at lower (higher) levels of the firm’s leverage (market intensity).

Research limitations/implications

Event studies are valuable for gauging initial impressions of management action, but they are not meant to address long-term value creation. While market reactions suggest the likelihood of an alliance’s success or failure, managers also assess the risk to a firm’s financial health should the alliance fail. As a result, announcements that signal the firm has discretionary capabilities to ameliorate the effect of a failed alliance are better received.

Originality/value

This study is the first to analyze the stock market’s perception and valuation of different types of risk, classified by exploration vs exploitation alliances. The study also contributes to the literature by analyzing how investors use the information about a firm’s financial leverage and marketing activities to fine-tune their valuation of different types of risk-taking activities.

Details

Management Decision, vol. 58 no. 4
Type: Research Article
ISSN: 0025-1747

Keywords

Article
Publication date: 3 November 2023

Lee J. Zane and Mark A. Tribbitt

Intellectual capital (IC) is essential to the success of new technology-based firms. However, young firms only possess some of the resources and capabilities needed to develop…

Abstract

Purpose

Intellectual capital (IC) is essential to the success of new technology-based firms. However, young firms only possess some of the resources and capabilities needed to develop, produce and market their innovative products and services. Hence, many form alliances to access complementary resources. This paper investigates the signaling effect of technology-based start-ups’ stock of IC on alliance formation.

Design/methodology/approach

This study analyzes primary data concerning specific classes of IC and the alliances formed. Data were collected from founders of 233 technology-based new ventures in the USA. Hypotheses were tested via hierarchical linear regression.

Findings

This study demonstrates that firms' IC, in the form of founders with doctorates and patents, is positively related to the classes of alliances formed. These stocks of IC send signals about credibility to the market for alliance partners, enabling the firms to form alliances and gain access to complementary resources. The number of founders with doctorates was positively related to R&D alliances and alliance partners in a similar place in the value chain as the focal firm. In contrast, the number of patents was positively related to total alliances, production-oriented alliances and alliances considered upstream from the focal firm.

Originality/value

This paper collects retrospective data from founders of technology-based new ventures. The research contributes to the literature with its results that founder human capital and patent portfolios are essential for technology-based firms' innovation and growth. However, little research has investigated how firms' possession of IC facilitates alliance formation. This paper investigates this connection explicitly.

Details

Journal of Intellectual Capital, vol. 25 no. 1
Type: Research Article
ISSN: 1469-1930

Keywords

Article
Publication date: 11 February 2014

Rajendra Prasad Mohanty and Prince Augustin

This paper traces the historical evolution and growth trajectory of the automotive and farm equipment sector, which is a very significant entity of the Mahindra & Mahindra (M&M…

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Abstract

Purpose

This paper traces the historical evolution and growth trajectory of the automotive and farm equipment sector, which is a very significant entity of the Mahindra & Mahindra (M&M) group. The purpose of this paper is to understand and provide a pragmatic framework through which the authors can see what were the internal and external factors and the spirit of the contemporary times that led to the changes in the nature of the group.

Design/methodology/approach

The “Greiner curve” model has been applied to interpret the evolutionary growth of the group and strategic trajectory explaining characteristics in its different phases.

Findings

M&M initially went through its share of learning and grew through pragmatic and, orchestrated entrepreneurial risk. The group made a very successful transition from a proprietorship model to a professionally managed group. It is found that rapid growth has been possible through innovation led collaboration. The group is increasingly organizing its innovation activities around the development of responses to specific challenges.

Research limitations/implications

This study suffers from methodological limitations associated with a stage model that the estimated length of the time the organizations will stay in a phase is not known. It is unclear whether passage through all stages is necessary; or whether, in some circumstances, one or more stages may be omitted, and if variations in sequencing can occur. The data for the initial years was not available in primary form and the paper had to depend entirely on the secondary sources.

Practical implications

Various strategies adopted by the group from time to time have practical implications for Indian economy. The group has faced many challenges, but challenge-led collaboration-driven approach represents a new type of innovation process that contrasts with other methods of business strategies and provides a sharper focus for managerial and technical issues and brings together stakeholders with diverse interests, expertise and perspectives.

Originality/value

This study is a unique attempt in India to trace the evolution of the strategic interventions in the context of a major business group, which is considered to be a symbolic representation of Indian economic history. The paper has got both academic as well as managerial utility.

Details

Journal of Strategy and Management, vol. 7 no. 1
Type: Research Article
ISSN: 1755-425X

Keywords

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