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

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  • Chong-En Bai

    ()

  • Zhigang Tao

    ()

  • Changqi Wu

    ()

Abstract

This paper presents a model of the joint venture that is grounded in the stylized facts we found from a sample of 200 joint venture contracts. The model incorporates the revenue-sharing contract into the incomplete contract frameworks of Grossman-Hart-Moore Property Rights Theory and the Transaction Cost Theory of the firm, and 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 o?ers strong support to our Property-Rights-Theory motivated model with self investment but rejects that with cooperative investment. The Transaction-Cost-Theory motivated model leaves some important empirical findings unexplained. Our findings also reject some of the existing theories of joint ownership.

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Bibliographic Info

Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 2003-563.

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Length: 73 pages
Date of creation: 20 Jun 2003
Date of revision:
Handle: RePEc:wdi:papers:2003-563

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Keywords: Joint Ventures; Control Right; Revenue-Sharing Contracts; Expropriation; Theory of the Firm;

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References

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Cited by:
  1. Qiangbing Chen & Yali Liu & Lu Jiang, 2010. "Culture distance and foreign equity ownership in international joint ventures: Evidence from China," Journal of Chinese Economic and Foreign Trade Studies, Emerald Group Publishing, Emerald Group Publishing, vol. 3(3), pages 189-203, December.
  2. Ari Van Assche & Galina A. Schwartz, 2008. "Institutions and Multinational Ownership Strategy," CIRANO Working Papers, CIRANO 2008s-07, CIRANO.
  3. Gattai, Valeria & Natale, Piergiovanna, 2013. "What makes a joint venture: Micro-evidence from Sino-Italian contracts," Review of Financial Economics, Elsevier, Elsevier, vol. 22(4), pages 194-205.
  4. Paija, Laura, 2004. "Allocation of Control Rights to Customised Products: Empirical Analysis of Finnish SMEs," Discussion Papers, The Research Institute of the Finnish Economy 918, The Research Institute of the Finnish Economy.
  5. Moskalev, Sviatoslav A. & Swensen, R. Bruce, 2007. "Joint ventures around the globe from 1990-2000: Forms, types, industries, countries and ownership patterns," Review of Financial Economics, Elsevier, Elsevier, vol. 16(1), pages 29-67.
  6. Bai, Chong-En & Lu, Jiangyong & Tao, Zhigang, 2010. "Capital or knowhow: The role of foreign multinationals in Sino-foreign joint ventures," China Economic Review, Elsevier, Elsevier, vol. 21(4), pages 629-638, December.
  7. Ari Van Assche & Galina A. Schwartz, 2013. "Contracting Institutions and Ownership Structure in International Joint Ventures," CIRANO Working Papers, CIRANO 2013s-04, CIRANO.
  8. Van Assche, Ari & Schwartz, Galina A., 2013. "Contracting institutions and ownership structure in international joint ventures," Journal of Development Economics, Elsevier, Elsevier, vol. 103(C), pages 124-132.
  9. Cheng, Leonard K. & Qiu, Larry D. & Tan, Guofu, 2005. "Foreign direct investment and international trade in a continuum Ricardian trade model," Journal of Development Economics, Elsevier, Elsevier, vol. 77(2), pages 477-501, August.

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