strategy doctoral ppt 2
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04/10/2023 Akshay S Bhat, XLRI Jamshedpur 1
BEHIND ACQUISITIONS OF
ALLIANCE PARTNERS:EXPLORATORY
LEARNING AND NETWORK
EMBEDDEDNESS Paper Review by Akshay S. Bhat, XLRI
Academy of Management Journal
2011, Vol. 54, No. 5, 1069–1080.
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Abstract
• Acquisition Literature dominated by economistic and atomistic assumptions
• This study extends acquisition research by integrating behavioral learning and social network perspectives to examine acquisitions of alliance partners
• At dyadic level, how learning's from one acquisition can drive subsequent acquisitions
• US industry empirical support to theory
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Again
• Exploration v ExploitationLearning
• Joint brokerage positions and relative uncertainityNetworks
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Intro
Alliances and Networks important for
external resources (Wang & Zajac, 2007)
Albeit literature treats them as
parallel, firms often ACQUIRE alliance
partners
What drives acquisitions of
alliance partners?
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Prior Research
Economic Financial Explanations
Transaction Costs
Agency conflicts
Real Options
Paid less attention
on Behavior
al and Network Drivers
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Rece
nt
Wor
k
Behavioral Decisions
Important in AQD
Firms embedded in network
relationships
This paper bridges these two theories (Motivation)
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This
Pape
r
Critical but unexplored drivers for
acquisitions to be explored
Alliance attributes and networks will be considered
Link the segmented literature together
Synthesis type of research
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Research Question
How do firms’ learning in alliances
and embeddedness in their alliance networks
drive their subsequent
acquisitions of alliance partners?
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Moti
vation
s
Why they did it ?
• Firms rely on part experience
• Prior studies focused on direct experience
• Role of firms from alliance networks
• Role of learning was explored by the authors
• Exploration v exploitation alliance
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Expl
orati
on
• Opportunity seeking vehicles
• Experiment with new knowledge
• Access Partners tacit knowledge
• Evaluate intrinsic sources• Build new competancies
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Schumpeterian Rents is the
focusFocus is not to discover new
knowledge but refine existing
one
Authors argue : exploration
better
Expl
oita
tion
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Authors argue..
• Firms are not atomistic players (disparate elements)
• Firms rather are relational entities• Subject to opportunities and constraints• Exploratory learning thrives in an open network• Although previous work talks a bit about
network embeddness it has focused on imitation mechanisms
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ALLIANCE LEARNING, NETWORKEMBEDDEDNESS, AND ACQUISITIONS
• Alliances and Networks external resources• Alliance Partial Control
• Acquisition Full Control (Complete ownership)
• Alliance involves piecemeal decision making• Acquisition Sunk cost/irreversible
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Commonalities
/Differ
ence
s
• Both to access external resources• Common motivations (Synergy)• One may inform the other• Both developed independently• No cross fertilization between the two
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Authors argue…
• Firms are adaptively “learning”• March (1991) provided a ex-exp framework to
deal with alliance heterogeneity• Both exploratory and exploitation lead to
evaluation of the partners tacit knowledge however exploratory has an advantage
• In addition to learning, acquisitions do not take place in vacuum
• They are embedded in a broad social context
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Authors propose.. (with help from other scholars)
• Important to integrate the behavioral learning perspective and social network perspective
• Learning thru awareness increases partners value, such learning takes place in network embeddness
• Actual awareness contingent upon a firms motivation and capability
• Two constructs for network embeddedness– Joint Brokerage Positions– Relative Centrality
• Acquisitions don’t take place in vacuum but wrt embeddedness in a social and economic context
• But important to integrate behavioral context
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Constructs
• Joint Brokerage refers to the collective network openness enjoyed by two firms in an alliance
• Relative centrality refers to the asymmetry in network positions between two alliance partner firms
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Effects of Alliance Learning
Exploration alliances
Firm risk taking
Understand partners resources
Increases understanding of true value
Knowledge search and creation
Close interaction and shared value creation
More dynamic
Understanding partners is more important
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Effects of Alliance Learning
• Maximize value of existing resources
• No interactive • More focus on
status quo• Easy for managers
to describe roles and relationships
• Less ambiguity
Exploitation
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Therefore
Hypothesis 1. Compared with exploitation alliances, exploration
alliances are more likely
to result in acquisitions of alliance partners.
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Moderating Roles of Network Embeddedness
• McFadyen and Cannella : Resources in Exploration may turn into liabilities in Exploitation if tasks at hand do not match with its network structure
• How partners leverage their network embeddedness is important as scope is not only for network embeddedness but also induce potential power conflicts
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Two important Dimensions of Network Embeddedness
Network Embeddedness
Joint Brokerage positions
Relative Centrality
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Joint Brokerage PositionsHigh Degree of Joint Brokerage
fosters access to new and diverse
channels thru structural holes
Structural Holes: Disconnect
between non redundant contacts
in a networkMay provide
increased value for
exploration alliancesSuch a dynamic process may force
a firm to acquire its alliance
partners in two ways
•First, the increased value of exploration alliances can alleviate firms’ qualms about the true value of partner firms and increase their confidence and motivation regarding internalizing the alliance activities through acquisition (Baum & Ingram, 2003). •Second, interpartner conflicts may provide more incentives to initiate acquisition of partner firms, which can resolve these conflicts and also yield more benefits through internalization and hierarchical control (Dussauge et al., 2000).
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And therefore they hypothesize
Hypothesis 2. A high degree of joint brokerage
occupied by alliance firms strengthens the positive relationship between exploration
alliances and subsequent acquisitions of alliance
partners.
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Relative Centrality
• We are interested in degree centrality• Degree Centrality :Extent to which a firm occupies a key
position with direct ties to other network members )• Therefore Relative Centrality is difference between two
firms degree centrality
• Central firms have greater access to various resources in the network
• More likely to receive information, conduits for assets, more power et al.
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And therefore they hypothesize
Hypothesis 3. A high level of relative centrality
between alliance firms strengthens the positive
relationship between exploration alliances and subsequent acquisitions
of alliance partners.
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Methods
• Sample– US Computer Industry– SW/Hardware– Industry alliance network using two decision rules• Types of relationship between alliances et al.• Attributes of those actors
– (at least one alliance)
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Dependent Variables
• Acquisition of Alliance partners
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Independent Variables
• Exploration Alliance Index• Joint Brokerage Positions• Relative Centrality
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Control Variables
• Equity Alliance Index• Strategic Interdependence• Asymmetry in firm size• Combined Financial Resources• Competitor Alliance Index
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Analysis
• Dependent variable is dichotomous• Logistic Regression Analysis was run• Multiple observations for a dyaid of several
years
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Contributions (1)
New way of looking at acquisition
research by looking at behavioral and
rational perspectives
Finding that learning, behaviour and acquisition are
interlinked
Findings that firms are interlinked, embedded in
networks
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Contributions (2)
Bridges two separate streams
Learning affects
acquisitions
Extends prior social network
literature
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Limitations + Future Research
• Only one industry studied for the sake of simplicity and accuracy
• Aspiring scholars can extend and generalize based on their findings
• Isolated researches on acquisitions, alliances and learning
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My Critique
• Tautological• They have shown behavior and learning
impacts but how exactly has not been covered in detail, but I appreciate that they have acknowledged it
• How learning happens (Dominant v Servile)