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Cultural distance and the pattern of equity ownership structure in international joint ventures

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  • Yamin, Mo
  • Golesorkhi, Sougand
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    Abstract

    This paper develops and tests hypotheses linking cultural distant to the ownership distribution of equity capital across the partners in international joint ventures (IJVs). The paper's underpinnings are linked to the role of equity shares in providing performance guarantees in joint ventures (JVs). It argues that for IJVs based in the home country of one of the partners, the vulnerability of the foreign partner to expropriation of partnership rents increases with its cultural distance from the home partner. We argue this implies the foreign partner is likely to own a smaller equity share of the IJV. Similar hypotheses are formulated with respect to whether the IJV partners are from the same or different triad regions, and cultural clusters. The hypotheses are tested with data on 442 UK-based joint ventures. Our empirical results demonstrate a significant impact of cultural distance on the pattern of equity ownership in IJVs.

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    Bibliographic Info

    Article provided by Elsevier in its journal International Business Review.

    Volume (Year): 19 (2010)
    Issue (Month): 5 (October)
    Pages: 457-467

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    Handle: RePEc:eee:iburev:v:19:y:2010:i:5:p:457-467

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    Keywords: International joint ventures Cultural distance Joint venture governance;

    References

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    Cited by:
    1. Meschi, Pierre-Xavier & Wassmer, Ulrich, 2013. "The effect of foreign partner network embeddedness on international joint venture failure: Evidence from European firms’ investments in emerging economies," International Business Review, Elsevier, vol. 22(4), pages 713-724.
    2. Hutzschenreuter, Thomas & Horstkotte, Julian, 2013. "Performance effects of international expansion processes: The moderating role of top management team experiences," International Business Review, Elsevier, vol. 22(1), pages 259-277.
    3. Moore, Fiona, 2012. "Identity, knowledge and strategy in the UK subsidiary of an Anglo-German automobile manufacturer," International Business Review, Elsevier, vol. 21(2), pages 281-292.
    4. Bowe, Michael & Golesorkhi, Sougand & Yamin, Mo, 2014. "Explaining equity shares in international joint ventures: Combining the influence of asset characteristics, culture and institutional differences," Research in International Business and Finance, Elsevier, vol. 31(C), pages 212-233.
    5. Malik, Tariq H. & Zhao, Yanzhi, 2013. "Cultural distance and its implication for the duration of the international alliance in a high technology sector," International Business Review, Elsevier, vol. 22(4), pages 699-712.

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