Advanced Search
MyIDEAS: Login to save this article or follow this journal

Explaining equity shares in international joint ventures: Combining the influence of asset characteristics, culture and institutional differences

Contents:

Author Info

  • Bowe, Michael
  • Golesorkhi, Sougand
  • Yamin, Mo
Registered author(s):

    Abstract

    This paper investigates the determinants of the observed contracted equity share ownership structure in international joint ventures (IJVs). We propose that the inherent intangibility of the assets that partner's contribute to the IJV, and both formal (legal) and informal (cultural) institutional differences between partners contribute to explaining the negotiated division of the IJV's equity share. Empirical results from 442 UK-based home-foreign IJVs, indicate that an IJV partner's equity share ownership is positively correlated with the intangibility of the assets they contribute to the IJV relative to those of the second partner. Both cultural and formal institutional differences exert a moderating influence on the observed asset intangibility-equity share relationship for the foreign IJV partner. We attribute this finding to both risk perceptions and the liability of foreignness.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.sciencedirect.com/science/article/pii/S0275531913000433
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Bibliographic Info

    Article provided by Elsevier in its journal Research in International Business and Finance.

    Volume (Year): 31 (2014)
    Issue (Month): C ()
    Pages: 212-233

    as in new window
    Handle: RePEc:eee:riibaf:v:31:y:2014:i:c:p:212-233

    Contact details of provider:
    Web page: http://www.elsevier.com/locate/ribaf

    Related research

    Keywords: International joint ventures; Culture; Institutional differences; Monitoring costs; Equity shares; Collateral;

    Find related papers by JEL classification:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Malhotra, Shavin & Sivakumar, K. & Zhu, PengCheng, 2011. "Curvilinear relationship between cultural distance and equity participation: An empirical analysis of cross-border acquisitions," Journal of International Management, Elsevier, vol. 17(4), pages 316-332.
    2. Merchant, Hemant, 2005. "The structure-performance relationship in international joint ventures: a comparative analysis," Journal of World Business, Elsevier, vol. 40(1), pages 41-56, February.
    3. Harris, Milton & Raviv, Artur, 1991. " The Theory of Capital Structure," Journal of Finance, American Finance Association, vol. 46(1), pages 297-355, March.
    4. Barzel, Yoram, 1982. "Measurement Cost and the Organization of Markets," Journal of Law and Economics, University of Chicago Press, vol. 25(1), pages 27-48, April.
    5. Lu, Jane W. & Hebert, Louis, 2005. "Equity control and the survival of international joint ventures: a contingency approach," Journal of Business Research, Elsevier, vol. 58(6), pages 736-745, June.
    6. Harry G Barkema & Freek Vermeulen, 1997. "What Differences in the Cultural Backgrounds of Partners Are Detrimental for International Joint Ventures?," Journal of International Business Studies, Palgrave Macmillan, vol. 28(4), pages 845-864, December.
    7. Drogendijk, Rian & Slangen, Arjen, 2006. "Hofstede, Schwartz, or managerial perceptions? The effects of different cultural distance measures on establishment mode choices by multinational enterprises," International Business Review, Elsevier, vol. 15(4), pages 361-380, August.
    8. Pennings, J.M. & Barkema , H. & Douma, S., 1994. "Organizational learning and diversification," Open Access publications from Tilburg University urn:nbn:nl:ui:12-382776, Tilburg University.
    9. W. J. Henisz, 2000. "The Institutional Environment for Economic Growth," Economics and Politics, Wiley Blackwell, vol. 12(1), pages 1-31, 03.
    10. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
    11. Anoop Madhok, 2006. "How much does ownership really matter? Equity and trust relations in joint venture relationships," Journal of International Business Studies, Palgrave Macmillan, vol. 37(1), pages 4-11, January.
    12. Jongwook Kim & Joseph T. Mahoney, 2005. "Property rights theory, transaction costs theory, and agency theory: an organizational economics approach to strategic management," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 223-242.
    13. Raghuram G. Rajan & Luigi Zingales, 1994. "What Do We Know About Capital Structure? Some Evidence from International Data," NBER Working Papers 4875, National Bureau of Economic Research, Inc.
    14. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 488-500, August.
    15. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    16. Slangen, Arjen H.L. & van Tulder, Rob J.M., 2009. "Cultural distance, political risk, or governance quality? Towards a more accurate conceptualization and measurement of external uncertainty in foreign entry mode research," International Business Review, Elsevier, vol. 18(3), pages 276-291, June.
    17. Oxley, Joanne E, 1997. "Appropriability Hazards and Governance in Strategic Alliances: A Transaction Cost Approach," Journal of Law, Economics and Organization, Oxford University Press, vol. 13(2), pages 387-409, October.
    18. Kaufmann, Jeffrey B. & O'Neill, Hugh M., 2007. "Do culturally distant partners choose different types of joint ventures?," Journal of World Business, Elsevier, vol. 42(4), pages 435-448, December.
    19. Yoram Barzel, 2005. "Organizational Forms and Measurement Costs," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 161(3), pages 357-, September.
    20. Henisz Witold J. & Williamson Oliver E., 1999. "Comparative Economic Organization—Within and Between Countries," Business and Politics, De Gruyter, vol. 1(3), pages 261-278, December.
    21. Rajan, Raghuram G & Zingales, Luigi, 1998. "Financial Dependence and Growth," American Economic Review, American Economic Association, vol. 88(3), pages 559-86, June.
    22. Paul W Beamish & John C Banks, 1987. "Equity Joint Ventures and Theory of the Multinational Enterprise," Journal of International Business Studies, Palgrave Macmillan, vol. 18(2), pages 1-16, June.
    23. Gelbuda, Modestas & Meyer, Klaus E. & Delios, Andrew, 2008. "International business and institutional development in Central and Eastern Europe," Journal of International Management, Elsevier, vol. 14(1), pages 1-11, March.
    24. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    25. Hart, Oliver D. & Moore, John, 1990. "Property Rights and the Nature of the Firm," Scholarly Articles 3448675, Harvard University Department of Economics.
    26. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
    27. Saul Estrin & Delia Baghdasaryan & Klaus E. Meyer, 2009. "The Impact of Institutional and Human Resource Distance on International Entry Strategies," Journal of Management Studies, Wiley Blackwell, vol. 46(7), pages 1171-1196, November.
    28. Oliver E. Williamson, 2000. "The New Institutional Economics: Taking Stock, Looking Ahead," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 595-613, September.
    29. Ainuddin, R. Azimah & Beamish, Paul W. & Hulland, John S. & Rouse, Michael J., 2007. "Resource attributes and firm performance in international joint ventures," Journal of World Business, Elsevier, vol. 42(1), pages 47-60, March.
    30. Oliver Hart, 2001. "Financial Contracting," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1079-1100, December.
    31. Yigang Pan, 1996. "Influences on Foreign Equity Ownership Level in Joint Ventures in China," Journal of International Business Studies, Palgrave Macmillan, vol. 27(1), pages 1-26, March.
    32. Luo, Yadong & Shenkar, Oded, 2011. "Toward a perspective of cultural friction in international business," Journal of International Management, Elsevier, vol. 17(1), pages 1-14, March.
    33. Benjamin Gomes-Casseres, 1990. "Firm Ownership Preferences and Host Government Restrictions: An Integrated Approach," Journal of International Business Studies, Palgrave Macmillan, vol. 21(1), pages 1-22, March.
    34. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    35. Berggren, Niclas & Jordahl, Henrik, 2003. "Does Free Trade Really Reduce Growth? Further Testing Using the Economic Freedom Index," Working Paper Series 2003:26, Uppsala University, Department of Economics.
    36. Williamson, Oliver E, 1979. "Transaction-Cost Economics: The Governance of Contractural Relations," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 233-61, October.
    37. Thomas Berger & Gillian Bristow, 2009. "Competitiveness and the Benchmarking of Nations—A Critical Reflection," International Advances in Economic Research, Springer, vol. 15(4), pages 378-392, November.
    38. Keith D Brouthers, 2013. "A retrospective on: Institutional, cultural and transaction cost influences on entry mode choice and performance," Journal of International Business Studies, Palgrave Macmillan, vol. 44(1), pages 14-22, January.
    39. Das, T. K. & Teng, Bing-Sheng, 2001. "A risk perception model of alliance structuring," Journal of International Management, Elsevier, vol. 7(1), pages 1-29.
    40. Jaideep Anand & Andrew Delios, 1997. "Location Specificity and the Transferability of Downstream Assets to Foreign Subsidiaries," Journal of International Business Studies, Palgrave Macmillan, vol. 28(3), pages 579-603, September.
    41. Arjen H L Slangen & Sjoerd Beugelsdijk, 2010. "The impact of institutional hazards on foreign multinational activity: A contingency perspective," Journal of International Business Studies, Palgrave Macmillan, vol. 41(6), pages 980-995, August.
    42. Klaus E. Meyer & Saul Estrin & Sumon Kumar Bhaumik & Mike W. Peng, 2009. "Institutions, resources and entry strategies in emerging economies," LSE Research Online Documents on Economics 4217, London School of Economics and Political Science, LSE Library.
    43. Yigang Pan, 2002. "Equity Ownership in International Joint Ventures: The Impact of Source Country Factors," Journal of International Business Studies, Palgrave Macmillan, vol. 33(2), pages 375-384, June.
    44. Sethi, Deepak & Judge, William, 2009. "Reappraising liabilities of foreignness within an integrated perspective of the costs and benefits of doing business abroad," International Business Review, Elsevier, vol. 18(4), pages 404-416, August.
    45. Chadee, Doren D. & Qiu, Feng, 2001. "Foreign ownership of equity joint ventures in China: a pooled cross-section-time series analysis," Journal of Business Research, Elsevier, vol. 52(2), pages 123-133, May.
    46. Jean‐Paul Roy, 2012. "IJV Partner Trustworthy Behaviour: The Role of Host Country Governance and Partner Selection Criteria," Journal of Management Studies, Wiley Blackwell, vol. 49(2), pages 332-355, 03.
    47. Teece, David J., 1992. "Competition, cooperation, and innovation : Organizational arrangements for regimes of rapid technological progress," Journal of Economic Behavior & Organization, Elsevier, vol. 18(1), pages 1-25, June.
    48. John Dunning & Sarianna Lundan, 2008. "Institutions and the OLI paradigm of the multinational enterprise," Asia Pacific Journal of Management, Springer, vol. 25(4), pages 573-593, December.
    49. Geert Hofstede & Cheryl A Van Deusen & Carolyn B Mueller & Thomas A Charles, 2002. "What Goals Do Business Leaders Pursue? A Study in Fifteen Countries," Journal of International Business Studies, Palgrave Macmillan, vol. 33(4), pages 785-803, December.
    50. Stroup, Michael D., 2007. "Economic Freedom, Democracy, and the Quality of Life," World Development, Elsevier, vol. 35(1), pages 52-66, January.
    51. Snejina Michailova & Kate Hutchings, 2006. "National Cultural Influences on Knowledge Sharing: A Comparison of China and Russia," Journal of Management Studies, Wiley Blackwell, vol. 43(3), pages 383-405, 05.
    52. Jan Johanson & Jan-Erik Vahlne, 2009. "The Uppsala internationalization process model revisited: From liability of foreignness to liability of outsidership," Journal of International Business Studies, Palgrave Macmillan, vol. 40(9), pages 1411-1431, December.
    53. Douglass C. North, 2005. "Introduction to Understanding the Process of Economic Change
      [Understanding the Process of Economic Change]
      ," Introductory Chapters, Princeton University Press.
    54. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817, October.
    55. George Baker & Robert Gibbons & Kevin J. Murphy, 2002. "Relational Contracts And The Theory Of The Firm," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 39-84, February.
    56. Oded Shenkar, 2001. "Cultural Distance Revisited: Towards a More Rigorous Conceptualization and Measurement of Cultural Differences," Journal of International Business Studies, Palgrave Macmillan, vol. 32(3), pages 519-535, September.
    57. Keith D Brouthers, 2002. "Institutional, Cultural and Transaction Cost Influences on Entry Mode Choice and Performance," Journal of International Business Studies, Palgrave Macmillan, vol. 33(2), pages 203-221, June.
    58. Barzel,Yoram, 1997. "Economic Analysis of Property Rights," Cambridge Books, Cambridge University Press, number 9780521597135.
    59. Linda Longfellow Blodgett, 1991. "Partner Contributions as Predictors of Equity Share in International Joint Ventures," Journal of International Business Studies, Palgrave Macmillan, vol. 22(1), pages 63-78, March.
    60. Kent Eriksson & Jan Johanson & Anders Majkg�rd & D Deo Sharma, 1997. "Experimental Knowledge and Costs in the Internationalization Process," Journal of International Business Studies, Palgrave Macmillan, vol. 28(2), pages 337-360, June.
    61. Tailan Chi, 1996. "Performance Verifiability and Output Sharing in Collaborative Ventures," Management Science, INFORMS, vol. 42(1), pages 93-109, January.
    62. Yamin, Mo & Golesorkhi, Sougand, 2010. "Cultural distance and the pattern of equity ownership structure in international joint ventures," International Business Review, Elsevier, vol. 19(5), pages 457-467, October.
    63. Rosalie L Tung & Alain Verbeke, 2010. "Beyond Hofstede and GLOBE: Improving the quality of cross-cultural research," Journal of International Business Studies, Palgrave Macmillan, vol. 41(8), pages 1259-1274, October.
    64. Ingmar Bj�rkman & G�nter K Stahl & Eero Vaara, 2007. "Cultural differences and capability transfer in cross-border acquisitions: the mediating roles of capability complementarity, absorptive capacity, and social integration," Journal of International Business Studies, Palgrave Macmillan, vol. 38(4), pages 658-672, July.
    65. Heather Berry & Mauro F Guill�n & Nan Zhou, 2010. "An institutional approach to cross-national distance," Journal of International Business Studies, Palgrave Macmillan, vol. 41(9), pages 1460-1480, December.
    66. Tjemkes, Brian V. & Furrer, Olivier & Adolfs, Koen & Aydinlik, Arzu Ülgen, 2012. "Response strategies in an international strategic alliance experimental context: Cross-country differences," Journal of International Management, Elsevier, vol. 18(1), pages 66-84.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:eee:riibaf:v:31:y:2014:i:c:p:212-233. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.