Joint venture instability and monitoring
AbstractIn this paper we build a theory of joint venture formation and instability based on synergy and monitoring. We find that monitoring problems may prevent the joint venture from forming at all. Moreover, joint venture formation usually involves over-monitoring, and ex post could involve cheating by one, or both the firms. It is also possible that joint venture formation leads to zero monitoring by both the firms. We demonstrate that faced with the possibility of over-monitoring, firms may choose to under-invest in improving the input quality. We also develop some testable implications of our theory.
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Bibliographic InfoPaper provided by Indian Statistical Institute, New Delhi, India in its series Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers with number 04-09.
Length: 24 pages
Date of creation: Jan 2003
Date of revision:
Joint venture; over-monitoring; under-monitoring; underinvestment;
Other versions of this item:
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-06-02 (All new papers)
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