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Joint venture instability in developing countries under entry

  • Banerjee, Shantanu
  • Mukherjee, Arijit

We explain the rationale for share adjustment in an international joint venture (JV) and opening up of a wholly owned subsidiary by the foreign JV partner. If the cost difference between the JV and other firms is small, the foreign firm opens a wholly owned subsidiary and completely sells-out its shares in its previously formed JV. If the cost difference is intermediate (large), the foreign firm adjusts (increases) its shareholding in the JV and opens (does not open) a competing subsidiary. JV instability may be the outcome of a friendly separation. There may also be situations with no share adjustment.

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Article provided by Elsevier in its journal International Review of Economics & Finance.

Volume (Year): 19 (2010)
Issue (Month): 4 (October)
Pages: 603-614

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Handle: RePEc:eee:reveco:v:19:y:2010:i:4:p:603-614
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