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Strategic Interactions, Bargaining Power and Stability of Joint Venture in an Emerging Nation

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  • Rituparna Kaushik

    (Indian Institute of Technology)

  • Sourabh Bikas Paul

    (Indian Institute of Technology)

Abstract

We model strategic interaction between a domestic firm and a foreign firm involved in a joint venture, incorporating negotiations over equity shares and its implications for stability in the context of an emerging country. The foreign firm has superior technology, whereas the domestic firm has better local market knowledge. Modelling simultaneous innovation effort and bargaining power over equity share, we provide a rationale for the stability of the joint venture. We find that a certain level of technological knowledge can empower the bargaining power under certain parameter configurations and assumptions, such that the firms will negotiate to agree over their equity shares and maintain the joint venture. In this context, the stability of the joint venture is always an expected outcome. We have also shown that the domestic firm’s bargaining power and knowledge acquisition directly affect the domestic firm’s R&D effort and threaten the stability of the JV. We try to justify a probable situation where the firms may negotiate hard over equity shares but still maintain the joint venture.

Suggested Citation

  • Rituparna Kaushik & Sourabh Bikas Paul, 2021. "Strategic Interactions, Bargaining Power and Stability of Joint Venture in an Emerging Nation," Journal of Industry, Competition and Trade, Springer, vol. 21(4), pages 543-564, December.
    • Handle: RePEc:kap:jincot:v:21:y:2021:i:4:d:10.1007_s10842-021-00368-2
    DOI: 10.1007/s10842-021-00368-2
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    More about this item

    Keywords

    Joint venture; Competition; Strategic interactions; Technology transfer; R&D;
    All these keywords.

    JEL classification:

    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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