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Transaction costs, behavioral uncertainty and the formation of interfirm cooperations: Syndication in the UK private equity market

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Author Info

  • M. MEULEMAN

    ()

  • S. MANIGART

    ()

  • A. LOCKETT
  • M. WRIGHT

Abstract

Empirical results on the relationship between uncertainty and interfirm cooperation are conflicting. To address this puzzle, we distinguish between two different sources of uncertainty: primary and behavioral uncertainty. We hypothesize that the effect of primary uncertainty on interfirm cooperation is moderated by the behavioral uncertainty associated with an exchange partner. Evidence from the formation of investment syndicates in the management buyout market shows that for high levels of behavioral uncertainty, there is a negative effect of primary uncertainty on interfirm cooperation, whereas for low levels of behavioral uncertainty there is a positive effect. Implications for theory and research are suggested.

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File URL: http://www.feb.ugent.be/nl/Ondz/wp/Papers/wp_06_359.pdf
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Bibliographic Info

Paper provided by Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 06/359.

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Length: 51 pages
Date of creation: Jan 2006
Date of revision:
Handle: RePEc:rug:rugwps:06/359

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Related research

Keywords: transaction cost economics; uncertainty; interorganizational strategy; social capital; reputation;

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References

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  1. 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.
  2. James A. Brander & Raphael Amit & Werner Antweiler, 2002. "Venture-Capital Syndication: Improved Venture Selection vs. The Value-Added Hypothesis," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 11(3), pages 423-452, 09.
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  6. Josh Lerner & Antoinetter Schoar, 2002. "The Illiquidity Puzzle: Theory and Evidence from Private Equity," NBER Working Papers 9146, National Bureau of Economic Research, Inc.
  7. Mike Wright, 1998. "Venture Capital and Private Equity: A Review and Synthesis," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 25(5&6), pages 521-570.
  8. Joshua Lerner, 1994. "The Syndication of Venture Capital Investments," Financial Management, Financial Management Association, vol. 23(3), Fall.
  9. Sahlman, William A., 1990. "The structure and governance of venture-capital organizations," Journal of Financial Economics, Elsevier, vol. 27(2), pages 473-521, October.
  10. Pegaret Pichler, 2001. "A Theory of the Syndicate: Form Follows Function," Journal of Finance, American Finance Association, vol. 56(6), pages 2237-2264, December.
  11. Megginson, William L & Weiss, Kathleen A, 1991. " Venture Capitalist Certification in Initial Public Offerings," Journal of Finance, American Finance Association, vol. 46(3), pages 879-903, July.
  12. Telser, L G, 1980. "A Theory of Self-enforcing Agreements," The Journal of Business, University of Chicago Press, vol. 53(1), pages 27-44, January.
  13. Artz, Kendall W. & Brush, Thomas H., 2000. "Asset specificity, uncertainty and relational norms: an examination of coordination costs in collaborative strategic alliances," Journal of Economic Behavior & Organization, Elsevier, vol. 41(4), pages 337-362, April.
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Cited by:
  1. S. De Prijcker & S. Manigart & M. Wright & W. De Maeseneire, 2009. "The influence of international human capital and international network relationships on the cross-border investment behaviour of private equity firms," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 09/597, Ghent University, Faculty of Economics and Business Administration.

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