High School

How does taking a real-options perspective by entering strategic alliances help incumbent firms?

A. It helps the incumbent firms gain the confidence of the partnering company by making credible commitments.

B. It helps the incumbent firms reduce the value gap they create through their product and service offerings.

C. It allows the incumbent firms to buy time and wait for the uncertainty surrounding the market and technology to fade.

D. It reduces the incumbent firms' cost of acquisition by enabling them to make the entire investment decision at the beginning.

Answer :

Taking a real-options perspective by entering strategic alliances helps incumbent firms in the following way: It helps the incumbent firms gain the confidence of the partnering company by making credible commitments. The answer is A.

When incumbent firms enter strategic alliances from a real-options perspective, they can make credible commitments to their partnering company.

By demonstrating their commitment and dedication to the alliance, incumbent firms can gain the trust and confidence of their partners. This is important because it establishes a solid foundation for collaboration and cooperation, fostering a mutually beneficial relationship.

Credible commitments signal to the partnering company that the incumbent firm is serious about the alliance and is willing to invest time, resources, and effort into making it successful. This can lead to increased cooperation, information sharing, and joint decision-making, which in turn can result in improved outcomes for both parties involved.

Thus, A. is the right option.

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