Final answer:
The main advantage of equity alliances over non-equity alliances is that they foster stronger ties between partners due to the exchange of shareholdings or ownership stakes, leading to a deeper commitment to mutual success. Option c is the correct answer.
Step-by-step explanation:
The question addresses the advantages of equity alliances compared to non-equity alliances in a business context. Among the options provided, the key advantage of equity alliances is that they produce stronger ties between partners. This is because an equity alliance typically involves an exchange of shareholdings or an ownership stake, which means that the companies involved have a vested interest in each other's success. As opposed to non-equity alliances, which are typically based on contracts and are more transactional, equity alliances lead to a deeper level of collaboration and commitment.
When two businesses enter an equity alliance, they combine resources and efforts to achieve a common goal, which may involve sharing knowledge, technology, or markets. These strong ties can be beneficial as they often lead to shared risks, investments in joint ventures, or even merging certain aspects of the companies to streamline operations and increase competitiveness.
While equity alliances generally require larger capital investments and are potentially less flexible because they involve ownership interests, the level of integration and potential for strategic control often outweighs these aspects, particularly in long-term collaborations where a strong partnership is necessary.
To address the provided reference information on early-stage corporate finance, venture capitalists, compared to bondholders, have better information regarding the profitability of a small firm because they are closely involved in the management, owning a substantial portion of the company, and can ensure good governance.
Therefore, the correct option is:
C. They produce stronger ties between partners.