Question

When entering a foreign market, it is advisable for a new venture that has a core competency only in R&D to form a strategic alliance with a local partner because:

A. the local partner can better protect its proprietary know-how.
B. building downstream complementary assets can be expensive and time-consuming.
C. the strategic alliance will reduce the differentiation of its product and service offerings.
D. the value gap created by the firm can be easily lowered in an alliance.

Answer 1

It's advisable for a new venture focused on R&D to form a strategic alliance in a foreign market to leverage local expertise and resources, as building complementary assets alone is costly and time-consuming.

Step-by-step explanation:

When entering a foreign market, it is advisable for a new venture that has a core competency only in R&D to form a strategic alliance with a local partner primarily because building downstream complementary assets can be expensive and time-consuming.

Forming a partnership allows a company to leverage the local market knowledge, resources, and established networks of the local partner, thereby facilitating smoother entry and faster establishment within the market. This collaboration aligns with the concept that businesses focusing on their core competencies, such as R&D, often prove more successful when they can rely on partners to handle other aspects, such as production, marketing or distribution, which are essential for success in the new market.