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International Expansion Through Sequential Investment: The Effects Of National Culture On Buyouts And Dissolutions In Biotechnology Partnerships

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  • TIMOTHY B. FOLTA

    (University of Kentucky)

  • WALTER J. FERRIER

    (University of Kentucky)

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    Abstract

    This study examines the role of national culture on an issue which is central to competitive strategy: whether to maintain flexibility or commit to a strategic direction. We consider that equity investments in foreign partners may be initiated as the first step in a sequential acquisition process. Applying a competing hazard model to a sample of 168 joint ventures and minority equity collaborations in the biotechnology industry, we find that cultural characteristics have some bearing on a firm's willingness to commit through partner acquisition or partnership dissolution, and its preference for flexibility embodied in maintaining an equity collaboration.

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    Bibliographic Info

    Paper provided by EconWPA in its series Game Theory and Information with number 9701001.

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    Length: 29 pages
    Date of creation: 17 Jan 1997
    Date of revision:
    Handle: RePEc:wpa:wuwpga:9701001

    Note: Type of Document - Binary file formatted for Word for Windows95; prepared on IBM compat. PC; to print on HP LaserJet; pages: 29. Manuscript submitted to the Journal of International Business Studies
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    Web page: http://128.118.178.162

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    1. W Chan Kim & Peter Hwang, 1992. "Global Strategy and Multinationals' Entry Mode Choice," Journal of International Business Studies, Palgrave Macmillan, vol. 23(1), pages 29-53, March.
    2. Bruce Kogut, 1991. "Joint Ventures and the Option to Expand and Acquire," Management Science, INFORMS, vol. 37(1), pages 19-33, January.
    3. Levy, David T, 1985. "The Transactions Cost Approach to Vertical Integration: An Empirical Examination," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 438-45, August.
    4. Pietra Rivoli & Eugene Salorio, 1996. "Foreign Direct Investment and Investment under Uncertainty," Journal of International Business Studies, Palgrave Macmillan, vol. 27(2), pages 335-357, June.
    5. William H Davidson, 1980. "The Location of Foreign Direct Investment Activity: Country Characteristics and Experience Effects," Journal of International Business Studies, Palgrave Macmillan, vol. 11(2), pages 9-22, June.
    6. Gomes-Casseres, Benjamin, 1989. "Ownership structures of foreign subsidiaries : Theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 11(1), pages 1-25, January.
    7. Kogut, Bruce, 1989. "The Stability of Joint Ventures: Reciprocity and Competitive Rivalry," Journal of Industrial Economics, Wiley Blackwell, vol. 38(2), pages 183-98, December.
    8. Trigeorgis, Lenos, 1991. "Anticipated competitive entry and early preemptive investment in deferrable projects," Journal of Economics and Business, Elsevier, vol. 43(2), pages 143-156, May.
    9. Majd, Saman & Pindyck, Robert S., 1987. "Time to build, option value, and investment decisions," Journal of Financial Economics, Elsevier, vol. 18(1), pages 7-27, March.
    10. Gatignon, Hubert & Anderson, Erin, 1988. "The Multinational Corporation's Degree of Control over Foreign Subsidiaries: An Empirical Test of a Transaction Cost Explanation," Journal of Law, Economics and Organization, Oxford University Press, vol. 4(2), pages 305-36, Fall.
    11. Paul W Beamish & John C Banks, 1987. "Equity Joint Ventures and Theory of the Multinational Enterprise," Journal of International Business Studies, Palgrave Macmillan, vol. 18(2), pages 1-16, June.
    12. Mikkelson, Wayne H. & Ruback, Richard S., 1985. "An empirical analysis of the interfirm equity investment process," Journal of Financial Economics, Elsevier, vol. 14(4), pages 523-553, December.
    13. McDonald, Robert & Siegel, Daniel, 1986. "The Value of Waiting to Invest," The Quarterly Journal of Economics, MIT Press, vol. 101(4), pages 707-27, November.
    14. Roberts, Kevin & Weitzman, Martin L, 1981. "Funding Criteria for Research, Development, and Exploration Projects," Econometrica, Econometric Society, vol. 49(5), pages 1261-88, September.
    15. Armour, Henry Ogden & Teece, David J, 1980. "Vertical Integration and Technological Innovation," The Review of Economics and Statistics, MIT Press, vol. 62(3), pages 470-74, August.
    16. M Krishna Erramilli, 1996. "Nationality and Subsidiary Ownership Patterns in Multinational Corporations," Journal of International Business Studies, Palgrave Macmillan, vol. 27(2), pages 225-248, June.
    17. Bruce Kogut & Harbir Singh, 1988. "The Effect of National Culture on the Choice of Entry Mode," Journal of International Business Studies, Palgrave Macmillan, vol. 19(3), pages 411-432, September.
    18. John Hagedoorn & Rajneesh Narula, 1996. "Choosing Organizational Modes of Strategic Technology Partnering: International and Sectoral Differences," Journal of International Business Studies, Palgrave Macmillan, vol. 27(2), pages 265-284, June.
    19. Caves, Richard E. & Bradburd, Ralph M., 1988. "The empirical determinants of vertical integration," Journal of Economic Behavior & Organization, Elsevier, vol. 9(3), pages 265-279, April.
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