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Revenue Sharing and Control Rights in Team Production: Theories and Evidence from Joint Ventures

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Author Info
Chong-En Bai () (University of Hong Kong)
Zhigang Tao () (University of Hong Kong)
Changqi Wu () (Peking University)

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Abstract

We present a model of team production motivated by the stylized facts we found from a sample of 200 joint-venture contracts. The model incorporates the revenue-sharing contract into the property rights and the transaction cost theories of the firm, and it emphasizes the impact of expropriation. Joint control can be optimal as well as unilateral control. Our econometric analysis of the revenue-sharing and control arrangements offers strong support to our model motivated by property rights theory with self-investment but rejects that with cooperative investment. The model motivated by transaction cost theory leaves some important empirical findings unexplained. Our findings reject some existing theories of joint ownership.

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Publisher Info
Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 35 (2004)
Issue (Month): 2 (Summer)
Pages: 277-305
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Handle: RePEc:rje:randje:v:35:y:2004:2:p:277-305

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References listed on IDEAS
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  1. Nöldeke, Georg & Schmidt, Klaus M., 1997. "Sequential Investments and Options to Own," CEPR Discussion Papers 1645, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  2. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law & Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
  3. Raghuram G. Rajan & Luigi Zingales, 1998. "Power In A Theory Of The Firm," The Quarterly Journal of Economics, MIT Press, vol. 113(2), pages 387-432, May. [Downloadable!] (restricted)
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  4. Dewatripont, Mathias & Tirole, Jean, 1994. "A Theory of Debt and Equity: Diversity of Securities and Manager-Shareholder Congruence," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 1027-54, November. [Downloadable!] (restricted)
  5. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-58, December. [Downloadable!] (restricted)
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  6. Yeon-Koo Che & Donald B. Hausch, 1999. "Cooperative Investments and the Value of Contracting," American Economic Review, American Economic Association, vol. 89(1), pages 125-147, March. [Downloadable!] (restricted)
  7. 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. [Downloadable!] (restricted)
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  8. Chu-Chia S. Lin & Ivan P.L. Png, 2002. "Monitoring Costs and the Mode of International Investment," Industrial Organization 0207012, EconWPA. [Downloadable!]
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  9. Aghion, Philippe & Bolton, Patrick, 1992. "An Incomplete Contracts Approach to Financial Contracting," Review of Economic Studies, Blackwell Publishing, vol. 59(3), pages 473-94, July. [Downloadable!] (restricted)
  10. Cai, Hongbin, 2003. " A Theory of Joint Asset Ownership," RAND Journal of Economics, The RAND Corporation, vol. 34(1), pages 63-77, Spring.
  11. Chiu, Y Stephen, 1998. "Noncooperative Bargaining, Hostages, and Optimal Asset Ownership," American Economic Review, American Economic Association, vol. 88(4), pages 882-901, September. [Downloadable!] (restricted)
  12. Minehart, D. & Neeman, Z., 1997. "Termination and Coordination in Partnerships," Papers 83, Boston University - Industry Studies Programme.
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  13. David De Meza & Ben Lockwood, 1998. "Does Asset Ownership Always Motivate Managers? Outside Options And The Property Rights Theory Of The Firm," The Quarterly Journal of Economics, MIT Press, vol. 113(2), pages 361-386, May. [Downloadable!] (restricted)
  14. Sanford J. Grossman & Oliver D. Hart, 1987. "One Share/One Vote and The Market for Corporate Control," Working papers 440, Massachusetts Institute of Technology (MIT), Department of Economics.
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  15. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 2000. "Investor protection and corporate governance," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 3-27. [Downloadable!] (restricted)
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  16. Claessens, Stijn & Djankov, Simeon & Joseph P. H. Fan & Lang, Larry H. P., 1999. "Expropriation of minority shareholders : evidence from East Asia," Policy Research Working Paper Series 2088, The World Bank. [Downloadable!]
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Cited by:
(explanations, 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.)

  1. Laura Paija, 2004. "Allocation of Control Rights to Customised Products: Empirical Analysis of Finnish SMEs," Discussion Papers 918, The Research Institute of the Finnish Economy. [Downloadable!]
  2. Ari Van Assche & Galina A. Schwartz, 2008. "Institutions and Multinational Ownership Strategy," CIRANO Working Papers 2008s-07, CIRANO. [Downloadable!]
  3. Jiahua Che & Giovanni Facchini, 2009. "Cultural differences, insecure property rights and the mode of entry decision," Economic Theory, Springer, vol. 38(3), pages 465-484, March. [Downloadable!] (restricted)
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