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Explaining equity shares in international joint ventures: Combining the influence of asset characteristics, culture and institutional differences

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  • Bowe, Michael
  • Golesorkhi, Sougand
  • Yamin, Mo

Abstract

This paper investigates the determinants of the observed contracted equity share ownership structure in international joint ventures (IJVs). We propose that the inherent intangibility of the assets that partner's contribute to the IJV, and both formal (legal) and informal (cultural) institutional differences between partners contribute to explaining the negotiated division of the IJV's equity share. Empirical results from 442 UK-based home-foreign IJVs, indicate that an IJV partner's equity share ownership is positively correlated with the intangibility of the assets they contribute to the IJV relative to those of the second partner. Both cultural and formal institutional differences exert a moderating influence on the observed asset intangibility-equity share relationship for the foreign IJV partner. We attribute this finding to both risk perceptions and the liability of foreignness.

Suggested Citation

  • Bowe, Michael & Golesorkhi, Sougand & Yamin, Mo, 2014. "Explaining equity shares in international joint ventures: Combining the influence of asset characteristics, culture and institutional differences," Research in International Business and Finance, Elsevier, vol. 31(C), pages 212-233.
    • Handle: RePEc:eee:riibaf:v:31:y:2014:i:c:p:212-233
    DOI: 10.1016/j.ribaf.2013.06.008
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    More about this item

    Keywords

    International joint ventures; Culture; Institutional differences; Monitoring costs; Equity shares; Collateral;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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