Alliances & Cooperative Strategy

MOR 565 ALLIANCES & COOPERATIVE STRATEGY FALL 2016

Instructor: Kyle J. Mayer, Hoffman Hall 502 E-mail: [email protected] Phone (Fax): 213-821-1141 (Fax 213-740-3582) Office Hours: By appointment Class Meetings TuTh 12:30 – 1:50 Time & Room: JKP102

COURSE SCOPE AND MISSION This course is intended to improve your ability to determine whether, when, and how to execute cooperative strategies as part of your firms’ overall strategy. The last decade has seen an explosion in cooperative activity between firms. As a result, it is likely that, regardless of your chosen career path, you will at some point either work for, help to establish, or compete with cooperative ventures. Managers considering collaborative activity face a range of issues: When should an interaction be structured as a joint venture, a contractual alliance, or simply as an arm’s-length contract? When should I prefer an alliance to doing the project entirely in-house? How can I best structure and manage this alliance - and what do I do to prevent competition between my partner and me within this alliance? How do I evaluate whether a prospective partner is best for me? A final component of the course goes on to examine the choice between an alliance or M&A. When does in make sense to acquire another firm rather than working with via contract? What are some of the major challenges in trying to integrate an acquired company? This course introduces students to the issues and analytical arguments behind these questions, drawing on recent advances in competitive strategy, organizational economics, and organizational behavior. Of course, even though it incorporates various theoretical perspectives, the course ultimately is designed to focus on the essential issues and problems of cooperative strategy as experienced by managers. The objectives of the course are to provide analytical frameworks and tools that will sharpen your ability to:  Recognize and evaluate collaborative opportunities;  Evaluate potential partners;  Anticipate problems faced by cooperative ventures and to manage these effectively;  Develop and assess an overall cooperative strategy;  Compare the benefits of collaboration to M&A; and  Prepare a coherent, internally-consistent plan and structure for a given collaborative venture.

PREREQUISITES  Core strategy course.

REQUIRED READING MATERIALS  Most cases and readings are available in the online course pack from Harvard Business School Publishing. Some readings, however, are available in Blackboard. I am putting as many readings as possible in Blackboard to save costs, but some are only available from HBS Publishing. To order

1 the reader, please go to the following web address: TBD--WEBADDRESSFROMHBSP You need to have a student account with HBS Publishing to get the reader. If you don’t already have one, it is quick and easy to create one.

INDIVIDUAL CONSULTATION -- Office Hours, see above. I am happy to meet with students to discuss progress or problems with the course materials and assignments. If you would like to meet, please contact me in advance to arrange a mutually convenient time. I am also available by email most days.

COURSE FORMAT This course will involve several different types of class sessions. Specifically, we will discuss cases and (occasionally HBR-style articles), engage with guest speakers from industry, and bring in current topics in alliances and joint ventures from the business press. In addition to these activities, however, I will throw in a few other types of sessions as I want to mix up the course and provide a variety of different perspectives and topics to maximize the learning opportunities over a 15-week semester.

To provide a fuller perspective on the course topics, I will utilize some guest speakers to provide a different perspective and insight from different industries about how alliances operate. I will utilize 2-4 guest speakers to provide an applied perspective of how these issues are experienced—mainly in the technology (software and medical device) and entertainment industries.

One unique scheduling aspect of this course is that I find value in non-standard course meetings. What I mean by that is that 80 minutes per session twice a week is great for a lot of things, but for some types of immersive activities we need more time. Towards that end I have created a slightly non-standard course schedule that I debuted in Spring 2015 and expanded last fall. Here are the details. I will create half-day (4.5 hour) sessions that will focus on alliances and M&A in different industries. The first will focus on the entertainment industry that will feature speakers from OnPrem (a very successful young consulting company focused on media and entertainment clients). I am also planning a second session for this fall that will focus on the tech sector. For each half-day session that I add, I have to cancel three classes so that the contact hours for the course stay in line with the units you receive for the course (a non-negotiable university requirement). The course schedule at the end of this syllabus identifies which sessions will be cancelled for the entertainment industry half-day session and the tech industry half-day session.

COMMUNICATION Electronic communication for this course will take place through Blackboard, including lecture notes and information about the group project, etc. Check the Blackboard course page regularly.

Please note that when printing lectures that are posted in Blackboard, please check to see if there is any annotation in the Notes section of Powerpoint—I often use the Notes section to provide additional explanation or examples.

STUDENTS WITH DISABILITIES Any student requesting academic accommodations based on a disability is required to register with Disability Services and Programs (DSP) each semester. A letter of verification for approved accommodations can be obtained from DSP. Please be sure the letter is delivered to me early in the semester. DSP is located in STU 301 and is open weekdays 8:30 a.m. - 5:00 p.m. The phone number for DSP is (213) 740-0776.

2 ACADEMIC INTEGRITY The following information on academic integrity, dishonesty, and the grading standard are placed here at the recommendation of the Marshall School of Business faculty and are taken from the Faculty Handbook. “The University, as an instrument of learning, is predicated on the existence of an environment of integrity. As members of the academic community, faculty, students, and administrative officials share the responsibility for maintaining this environment. Faculty have the primary responsibility for establishing and maintaining an atmosphere and attitude of academic integrity such that the enterprise may flourish in an open and honest way. Students share this responsibility for maintaining standards of academic performance and classroom behavior conducive to the learning process. Administrative officials are responsible for the establishment and maintenance of procedures to support and enforce those academic standards. Thus, the entire University community bears the responsibility for maintaining an environment of integrity and for taking appropriate action to sanction individuals involved in any violation. When there is a clear indication that such individuals are unwilling or unable to support these standards, they should not be allowed to remain in the University.” (Faculty Handbook, 1994: 20) Academic dishonesty includes: (Faculty Handbook, 1994: 21-22) 1. Examination behavior - any use of external assistance during an examination shall be considered academically dishonest unless expressly permitted by the teacher. 2. Fabrication - any intentional falsification or invention of data or citation in an academic exercise will be considered a violation of academic integrity. 3. Plagiarism - the appropriation and subsequent passing off of another’s ideas or words as one’s own. If the words or ideas of another are used, acknowledgment of the original source must be made through recognized referencing practices. 4. Other Types of Academic Dishonesty - submitting a paper written by or obtained from another, using a paper or essay in more than one class without the teacher’s express permission, obtaining a copy of an examination in advance without the knowledge and consent of the teacher, changing academic records outside of normal procedures and/or petitions, using another person to complete homework assignments or take-home exams without the knowledge or consent of the teacher.

COURSE REQUIREMENTS AND EVALUATION Participation – 25% Regular attendance and class participation are critical to successfully completing this course. You are expected to participate actively in each class session. You are encouraged to prepare for class with your colleagues (after all, this is a course on collaboration). However, each member of the class should be fully conversant in the material. If for some reason you are not prepared, please let me know before the start of class to save us both the embarrassment of my calling on you. Given the importance of class discussion, pre-class preparation is crucial. For cases, you should be prepared to set forth the core challenge facing the case protagonist(s), offer a critical assessment of the situation, and lay out cogently and persuasively a course of action. For readings, you should be prepared to outline the topic that each reading addresses, describe its central points, and offer your critical analysis of them. When cases and readings are assigned for the same day, you should be able to draw links between the case and reading in your discussion. Assignment questions for each session will be posted to the course page in Blackboard, typically at least a week prior to the class for which they are assigned. It is important to appreciate that class discussion is itself a collaborative activity. Please listen carefully to one another and attempt to build on or constructively critique prior comments. An effective participant:  Is a good listener;  Makes points relevant to the ongoing discussion;

3  Makes comments that add to our understanding of the case, topic and/or article;  Is willing to challenge ideas that are being expressed; and  Integrates material from a variety of sources (e.g., past classes, other courses, and their own experience) to the discussions in class.

Individual Assignment 1—15 or 20% Pick a case we will do during the term and prepare a report on what has happened since the end of the case. The report should not exceed three pages double-spaced (excluding any attachments) and should discuss not only what happened (no more than half a page) but also the lessons learned in light of the concepts discussed throughout the course—this latter topic should be the main focus of the report. The key aspects of this assignment are the takeaways from what has happened since the case and how they generalize to help us understand how to craft and manage alliances more effectively. The assignment is due (emailed to me or hardcopy) at the beginning of class on the day that we discuss the case in class—no assignments will be accepted after we have discusses a case.

Group Project – 40% Term projects will be completed in teams of 5-6 students. Teams should be finalized (and emailed to me) no later than Friday, September 4. Teams are used in this course because teams play central roles in organizations (and this is a course about alliances and cooperation). Working in teams provides you with an opportunity to learn from your colleagues, and practice (and evaluate your own effectiveness) working, managing, solving problems, and making strategic decisions in a setting that approximates the management teams typically charged with such tasks. Your group will need to select a class session (five days are reserved for this purpose on the class outline— including both of our half-day sessions on the entertainment and technology issues) and lead a 20-30 minute class discussion of an alliance or an alliance-related issue. You need to clear your selected alliance or issue with me in advance and I will engage with each group before their scheduled day to review their plan for the class discussion. In addition, groups must distribute their reading materials (that will be the basis of the class discussion) to their classmates at least one week prior to the day they lead the discussion. Groups should email case materials to me and I can post them to Blackboard. You can use a recent or current alliance or acquisition as a vehicle for case discussion (as long as you can collect enough information to have a meaningful class discussion). Another possibility is to examine some current trend(s) in alliances or a recent change in policy that may impact alliance formation or structure, and see what impact it is likely to have going forward. I am also open to other ideas, but every group must clear their topic with me at least three weeks before their scheduled date to lead the class discussion. You must submit a 1-2 page outline of your case and the learning points that should arise from discussing it by Wednesday, September 9. Submit your outline by email. Rather than lumping all these group-led discussions together at the end of the semester, we will spread them over the second half of the semester in order to mix things up. There will be two components to the first group project: 1. Leadership of the Discussion: I will evaluate how effectively you led the class discussion. Remember that this is NOT a presentation! You are leading a case discussion and need to facilitate the participation of your peers in the room. The entire team needs to be at the front of the room for the case discussion. 25% of the course grade. 2. Written case/teaching plan. On the day your group is to lead the discussion, you will turn in a 2-5 page write-up of your plan for leading the discussion. Sometimes discussions go off course (not a surprise, I know), and sometimes this can be a good thing, so I want to see what your plan was and how you

4 balanced sticking with the plan and adapting to class comments. Having a plan is a key component of generating a good discussion. The teaching plan can be emailed to me before class or you can a bring me a hardcopy at the beginning of class the day you will lead the discussion. 15% of the course grade.

Final Assignment —15% or 20% TBD

5 Weekly Schedule—Subject to Change

Session Topics Case Additional Readings #1 August 23 Set expectations, explain flow of class, begin discussing alliance None None concepts we will cover. Discuss a current alliance.

Module 1: The Basics of Collaboration: When to Ally and with Whom? #2 August 25 What are some of the main challenges alliances face? Tata Starbucks How do firms assess the potential and risks of different possible alliance partners? How do firms plan for execution of the alliance? #3 August 30 The value-logic of collaboration Google – Samsung Capron & Mitchell When is collaboration better than doing it yourself? Alliance (Contract vs. Ally) We will compare two different approaches in the same industry (Two separate cases— as we look at Google’s relationship with Samsung and both in Blackboard) Microsoft’s relationship with Nokia. Microsoft/Nokia Alliance #4 September 1 What elements are important to consider when determining Share Our Strength & Adobor (2006) whether two firms are a good fit? American Express: How does this vary based on industry context and the mission of Developing Marketing the organization? Alliances (A) What are the differences between inter-personal and inter-firm relationships?

Module 2: Alliance Negotiation and Design #5 September 6 What role do contracts play in alliances and other inter- Discuss Mayer & Argyres Mayer & Argyres (2004) organizational relationships? article. #6 September 8 How do we negotiate and structure an alliance? Honda Rover (A) How do we deal with competition and cooperation, especially in an international context? Alliances in the auto industry.

Module 3: Collaboration & Competition in Alliances #7 September 13 Guest Speaker: Morgan McKeown, Edwards Life Sciences and Key in Strategies LLC September 15 NO CLASS—Cancelled to create entertainment industry session September 20 NO CLASS—Cancelled to create entertainment industry session #8 September 22 How do we govern alliances over time? Wintel (A) How do we balance incentives that don’t always align? #9 September 27 What is an alliance capability and how can a firm develop it? Discuss Dyer et al and Dyer, Kale and Singh Kanter articles. (2001) in SMR Kanter (1994) in HBR

Module 4: Corporate Alliances with NGOs & Other Non-Profits #10 September 29 How should NGOs and other non-profit organizations influence Starbucks and Peloza & Falkenberg corporation behaviour? Conservation International (2009) What are some of the main issues facing corporate - non-profit alliances or JVs? #11 October 4 How can NGOs work effectively with corporations? Power Partnerships: How can corporations balance NGO goals with their own profit Hybrid Electric Delivery directives? Truck by Eaton, Fed Ex How do we define success in an alliance? and Environmental Defense

Module 5: Different Types of Collaboration #12 October 6 Crowdsourcing: A different kind of collaboration TopCoder (A)

#13 October 7 EXTRA HALF DAY FRIDAY SESSION: Alliances in the Readings to be distributed FRIDAY Entertainment Industry via Blackboard one week 8-12:30 (1) Student led cases related to the entertainment industry before class. (2) (3) Some lecture and discussion of current alliance and M&A activity in the entertainment industry (time permitting) (4) Two guest speakers on collaboration in entertainment. Candice Lu, Founding Partner at OnPrem Solution Partners (Formerly of Cognizant, SVC, and CBS)

6 John Stewart, Principal at OnPrem Solution Partners (Formerly of NBCUniversal and Fox) #14 October 11 NO CLASS—Cancelled to create entertainment industry session #15 October 13 Dividing tasks among partners General Electric and Mayer & Teece (2008) Problems of downstream conflict SNECMA (A) Designing alliances in the aerospace industry What does it take to design effective collaboration? What role does the contract play in collaboration? #16 October 18 Student led case discussions: Readings to be distributed - via Blackboard one week - before class. #17 October 20 Corporate venture capital--collaboration borne of an investment Google - Uber between a firm and a startup. CVC versus traditional VC and managing relationships with CVC investors. Google-Uber will be used as a case example but we will discuss others as well. #18 October 25 Student led case discussions: Readings to be distributed - via Blackboard one week - before class.

Module 6: International Collaboration #19 October 27 Joint ventures as a vehicle for foreign expansion: opportunities Shanghai General Motors: Bamford, Ernst & Fubini and challenges The Rise of a Late-Comer (2004) #20 November 1 Managing joint ventures with high levels of political risk. Journey to Sakhalin: Henisz & Zelner (2010) The risks of joint ventures with high fixed investment. Royal Dutch/Shell in Russia (A)

Module 7: Alliances vs. Mergers & Acquisitions #21 November 3 Student led case discussions: Readings to be distributed - via Blackboard one week - before class. November 8 NO CLASS—Cancelled to create technology sector session #22 November 10 When to acquire versus ally? The Walt Disney Capron & Mitchell (Ally Balancing the challenges of cooperation across firm boundaries Company and Pixar: To vs. Acquire) with post-merger integration issues and the challenges of running Acquire or Not to Acquire multi-business enterprises. #23 November 11 EXTRA HALF DAY FRIDAY SESSION: Alliances in the Readings to be distributed FRIDAY technology sector: via Blackboard one week 8-12:30 (1) Cases (student led): before class. NOTE: Date of half day on Friday is not finalized (2) Mini- lecture + Current alliance and M&A activity in tech sector (if time given guest speakers and cases) (3) Guest speaker(s) Atherton Carty, Lockheed Martin Gregg Nahass, PwC #24 November 15 Student led case discussions: Readings to be distributed - via Blackboard one week - before class. November 17 NO CLASS—Cancelled to create technology sector session #25 November 22 Why is post-merger integration so difficult? Post Merger Integration at A more detailed look at the challenges of determining how much Northrop Grumman IT to integrate and how to do it. November 24 NO CLASS—THANKSGIVING HOLIDAY

Wrap up #26 November 29 Putting it all together – the course, Marshall and the MBA Discussion and course None experience. review. December 1 NO CLASS—Cancelled to create technology sector session Final Exam Date Individual Final Paper Due Tues, 12/13, 11 am

* Readings in red text indicate that the article or case will be posted to Blackboard and is NOT in the course reader that is available from Harvard Business School Publishing.

Notes on the Course Reader the following articles will be in the course reader from HBS Publishing: Adobor: “Role of Personal Relationships in Inter-Firm Alliances” Dyer, Kale & Singh: “How to Make Strategy Alliances Work”

7 Kanter: “Collaborative Advantage” Peloza & Falkenberg: “The Role of Collaboration in Achieving CSR Objectives” Bamford, Ernst & Fubini: “Launching a World-Class JV” Henisz & Zelner: “The Hidden Risks in Emerging Markets” Capron & Mitchell: “When to Borrow via Alliance: Alliance vs Acquisition”