Question 1

What type of strategic alliance involves two or more firms creating and together owning a new independent organization?

Accepted Answer

A) Partnership 
B) Tapered integration 
C) Close-knit semi-formal relationship 
D) Mutual agreement 
E) Joint venture

Question 2

Which of the following in the late 19ᵗʰ century was predicted by the asset-specificity hypothesis?

Accepted Answer

A) Forward integration was most likely to occur for products that require specialized investments in human capital 
B) Increases in the size of manufacturing firms led to independent wholesale and marketing agents losing scale/scope cost advantages and in turn led to manufacturers forward integrating into marketing and distribution 
C) Forward integration was most likely to occur for products that do not require specialized investments in equipment and facilities 
D) For industries with small manufacturers, marketing relied on specialized assets 
E) For industries with small manufacturers, distribution relied on specialized assets

Question 3

Suppose we have two firms (Firm 1 & Firm 2)enter into a transaction where Firm 1 is upstream of firm 2 in a vertical chain.What term best describes the organization of the transaction where the two firms are independent,each with control over its own assets?

Accepted Answer

A) Backward Integration 
B) Forward integration 
C) Nonintegration 
D) Contractually unbound 
E) Contractually bound

Question 4

Which of the following features of transactions make those transactions excellent candidates for alliances?

Accepted Answer

A) The transaction involves impediments to comprehensive contracting 
B) The transaction is complex, not routine. 
C) The transaction involves the creation of relationship-specific assets by both parties in the relationship, and each party to the transaction could hold up the other 
D) It is excessively costly for one party to develop all the necessary expertise to carry out all the activities itself 
E) All of the above

Question 5

According to the GHM Theory,the choice between an in-house sales force versus independent agents should turn on the relative importance of investments in developing persistent clients by the agent versus list-building activities by the insurance firm.What would GHM thus predict about the sales of whole life versus term life insurance?

Accepted Answer

A) Both would be sold by the insurance company's in-house sales force 
B) Whole life would be sold by the insurance company's in-house sales force; term by an independent agent 
C) Whole life would be sold by an independent agent; term by the insurance company's in-house sales force 
D) Both would be sold by an independent agent 
E) An insurance company would try to "buy" the business (whole and term life insurance)of its independent agents

Exam 6: Organizing Vertical Boundariesvertical Integration and Its Alternatives

What type of strategic alliance involves two or more firms creating and together owning a new independent organization?

Which of the following in the late 19ᵗʰ century was predicted by the asset-specificity hypothesis?

Suppose we have two firms (Firm 1 & Firm 2) enter into a transaction where Firm 1 is upstream of firm 2 in a vertical chain.What term best describes the organization of the transaction where the two firms are independent,each with control over its own assets?

Which of the following features of transactions make those transactions excellent candidates for alliances?