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Strategy doctoral ppt 2

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  • 1. BEHIND ACQUISITIONS OF ALLIANCE PARTNERS: EXPLORATORY LEARNING AND NETWORK Paper Review by Akshay S. Bhat, XLRI EMBEDDEDNESS Academy of Management Journal 2011, Vol. 54, No. 5, 1069–1080.1/24/2013 Akshay S Bhat, XLRI Jamshedpur 1
  • 2. 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 learnings from one acquisition can drive subsequent acquisitions• US industry empirical support to theory1/24/2013 Akshay S Bhat, XLRI Jamshedpur 2
  • 3. Learning • Exploration v Exploitation • Joint brokerage positions Networks and relative uncertainity1/24/2013 Akshay S Bhat, XLRI Jamshedpur 3
  • 4. 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?1/24/2013 Akshay S Bhat, XLRI Jamshedpur 4
  • 5. Prior Research Paid less attention on Financial Transaction Agency Real Economic Explanations Costs Behavior conflicts Options al and Network Drivers1/24/2013 Akshay S Bhat, XLRI Jamshedpur 5
  • 6. This paper bridges these two theories (Motivation) Firms embedded in network relationships Behavioral Decisions Important in AQD1/24/2013 Akshay S Bhat, XLRI Jamshedpur 6
  • 7. Critical but Alliance Link the unexplored attributes and segmented Synthesis type drivers for networks will literature of research acquisitions to be considered together be explored1/24/2013 Akshay S Bhat, XLRI Jamshedpur 7
  • 8. Research Question acquisitions of alliance drive their partners? subsequent and embeddedness How do firms’ in their alliance learning in networks alliances1/24/2013 Akshay S Bhat, XLRI Jamshedpur 8
  • 9. • 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 alliance1/24/2013 Akshay S Bhat, XLRI Jamshedpur 9
  • 10. • Opportunity seeking vehicles • Experiment with new knowledge • Access Partners tacit knowledge • Evaluate intrinsic sources • Build new competancies1/24/2013 Akshay S Bhat, XLRI Jamshedpur 10
  • 11. Schumpeterian Rents is the focus Focus is not to discover new knowledge but refine existing one Authors argue : exploration better1/24/2013 Akshay S Bhat, XLRI Jamshedpur 11
  • 12. 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 mechanisms1/24/2013 Akshay S Bhat, XLRI Jamshedpur 12
  • 13. ALLIANCE LEARNING, NETWORK EMBEDDEDNESS, AND ACQUISITIONS • Alliances and Networks  external resources • Alliance  Partial Control • Acquisition  Full Control (Complete ownership) • Alliance involves piecemeal decision making • Acquisition  Sunk cost/irreversible1/24/2013 Akshay S Bhat, XLRI Jamshedpur 13
  • 14. • Both to access external resources • Common motivations (Synergy) • One may inform the other • Both developed independently • No cross fertilization between the two1/24/2013 Akshay S Bhat, XLRI Jamshedpur 14
  • 15. 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 context1/24/2013 Akshay S Bhat, XLRI Jamshedpur 15
  • 16. 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 context1/24/2013 Akshay S Bhat, XLRI Jamshedpur 16
  • 17. 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 firms1/24/2013 Akshay S Bhat, XLRI Jamshedpur 17
  • 18. Effects of Alliance Learning 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 important1/24/2013 Akshay S Bhat, XLRI Jamshedpur 18
  • 19. Effects of Alliance Learning • Maximize value of existing resources • No interactive • More focus on Exploitation status quo • Easy for managers to describe roles and relationships • Less ambiguity1/24/2013 Akshay S Bhat, XLRI Jamshedpur 19
  • 20. Therefore Hypothesis 1. Compared with exploitation alliances, exploration alliances are more likely to result in acquisitions of alliance partners.1/24/2013 Akshay S Bhat, XLRI Jamshedpur 20
  • 21. 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 conflicts1/24/2013 Akshay S Bhat, XLRI Jamshedpur 21
  • 22. Two important Dimensions of Network Embeddedness Joint Network Relative Brokerage Embeddedness Centrality positions1/24/2013 Akshay S Bhat, XLRI Jamshedpur 22
  • 23. Joint Brokerage Positions •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).1/24/2013 Akshay S Bhat, XLRI Jamshedpur 23
  • 24. 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.1/24/2013 Akshay S Bhat, XLRI Jamshedpur 24
  • 25. Relative Centrality1/24/2013 Akshay S Bhat, XLRI Jamshedpur 25
  • 26. 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.1/24/2013 Akshay S Bhat, XLRI Jamshedpur 26
  • 27. 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)1/24/2013 Akshay S Bhat, XLRI Jamshedpur 27
  • 28. Dependent Variables • Acquisition of Alliance partners1/24/2013 Akshay S Bhat, XLRI Jamshedpur 28
  • 29. Independent Variables• Exploration Alliance Index• Joint Brokerage Positions• Relative Centrality1/24/2013 Akshay S Bhat, XLRI Jamshedpur 29
  • 30. Control Variables• Equity Alliance Index• Strategic Interdependence• Asymmetry in firm size• Combined Financial Resources• Competitor Alliance Index1/24/2013 Akshay S Bhat, XLRI Jamshedpur 30
  • 31. Analysis• Dependent variable is dichotomous• Logistic Regression Analysis was run• Multiple observations for a dyaid of several years1/24/2013 Akshay S Bhat, XLRI Jamshedpur 31
  • 32. Contributions (1) New way of looking at Finding that acquisition research by Findings that firms are learning, behaviour and looking at behavioral interlinked, embedded acquisition are and rational in networks interlinked perspectives1/24/2013 Akshay S Bhat, XLRI Jamshedpur 32
  • 33. Contributions (2) Bridges two Learning Extends prior separate affects social network acquisitions literature streams1/24/2013 Akshay S Bhat, XLRI Jamshedpur 33
  • 34. 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 learning1/24/2013 Akshay S Bhat, XLRI Jamshedpur 34
  • 35. 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)1/24/2013 Akshay S Bhat, XLRI Jamshedpur 35