Globalization Through Acquisition and Alliances - The INSEAD-Wharton Alliance on Globalizing

For every stunningly successful acquisition or alliance that a multinational has engaged in, there seem to have been an equal number of colossal failures. INSEAD's Maurizio Zollo and Wharton's Harbir Singh examine how MNCs can make the right choices between acquisitions or alliances, and how other factors that can destabilise such deals - especially post-entry managerial problems - can best be dealt with. Their analysis helps broaden recent knowledge as to how acquisitions vs. alliances really compare in terms of competence requirements, and the relative value of the various learning processes that may be involved.

by Maurizio Zollo, Harbir Singh
Last Updated: 23 Jul 2013

How can multinationals make the right choice between acquisitions or alliances? How can the post-entry managerial challenges best be dealt with? Most importantly, how can companies best learn to tackle these types of problems in a systematic and effective way?

Associate Professor of Strategy Maurizio Zollo and Professor Harbir Singh of the Wharton School provide what they call an "evolutionary perspective" on the international growth of the world's leading multinationals, and how their developmental paths have affected their choices between different possible modes of growth. In doing so, they focus on what they consider three of the most critical, yet still quite poorly understood issues in this growth process:

- How do firms choose between the two most common external modes of growth?

- How do they design and manage the post-entry adjustment period?

- How do they learn how to manage the entry process through acquisitions and alliances?

The authors provide an overview of why and how some now globalised multinationals chose the expansionary paths they did. In doing so, they hope to add to recent theoretical and empirical analyses to show how acquisitions and alliances really compare in terms of competence requirements, as well as the relative value of whatever learning processes may be involved.

The automotive industry, where both acquisitions and alliances have long been used to globalise corporations and to consolidate capacity in a rapidly changing industry, is chosen to illustrate how different recent evolutionary choices have led to very different levels of success regarding M&As. Zollo and Singh also consider:

* Managing post-entry dynamics, including both the level of integration and the relational quality in the post-entry phase.

* Learning best practices, including "lessons" from two firms that have come to be seen as exemplary in best practices for the management of alliances: Hewlett-Packard and Corning.

* Enablers of learning, including the development of relational and integration capabilities.

* Barriers to learning, including the main factors affecting the efficacy of learning processes in relation to managing acquisitions.

Cambridge University Press, 2004

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