IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

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

Listed author(s):
  • Bowe, Michael
  • Golesorkhi, Sougand
  • Yamin, Mo
Registered author(s):

    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.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.sciencedirect.com/science/article/pii/S0275531913000433
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Elsevier in its journal Research in International Business and Finance.

    Volume (Year): 31 (2014)
    Issue (Month): C ()
    Pages: 212-233

    as
    in new window

    Handle: RePEc:eee:riibaf:v:31:y:2014:i:c:p:212-233
    DOI: 10.1016/j.ribaf.2013.06.008
    Contact details of provider: Web page: http://www.elsevier.com/locate/ribaf

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as
    in new window

    1. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
    2. Arjen H L Slangen & Sjoerd Beugelsdijk, 2010. "The impact of institutional hazards on foreign multinational activity: A contingency perspective," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 41(6), pages 980-995, August.
    3. Drogendijk, Rian & Slangen, Arjen, 2006. "Hofstede, Schwartz, or managerial perceptions? The effects of different cultural distance measures on establishment mode choices by multinational enterprises," International Business Review, Elsevier, vol. 15(4), pages 361-380, August.
    4. Oliver Hart, 2001. "Financial Contracting," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1079-1100, December.
    5. Saul Estrin & Delia Baghdasaryan & Klaus E. Meyer, 2009. "The Impact of Institutional and Human Resource Distance on International Entry Strategies," Journal of Management Studies, Wiley Blackwell, vol. 46(7), pages 1171-1196, November.
    6. Tjemkes, Brian V. & Furrer, Olivier & Adolfs, Koen & Aydinlik, Arzu Ülgen, 2012. "Response strategies in an international strategic alliance experimental context: Cross-country differences," Journal of International Management, Elsevier, vol. 18(1), pages 66-84.
    7. Teece, David J., 1992. "Competition, cooperation, and innovation : Organizational arrangements for regimes of rapid technological progress," Journal of Economic Behavior & Organization, Elsevier, vol. 18(1), pages 1-25, June.
    8. Lu, Jane W. & Hebert, Louis, 2005. "Equity control and the survival of international joint ventures: a contingency approach," Journal of Business Research, Elsevier, vol. 58(6), pages 736-745, June.
    9. Yamin, Mo & Golesorkhi, Sougand, 2010. "Cultural distance and the pattern of equity ownership structure in international joint ventures," International Business Review, Elsevier, vol. 19(5), pages 457-467, October.
    10. Oliver E. Williamson, 2000. "The New Institutional Economics: Taking Stock, Looking Ahead," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 595-613, September.
    11. 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.
    12. Berggren, Niclas & Jordahl, Henrik, 2003. "Does Free Trade Really Reduce Growth? Further Testing Using the Economic Freedom Index," Working Paper Series 2003:26, Uppsala University, Department of Economics.
    13. Jan Johanson & Jan-Erik Vahlne, 2009. "The Uppsala internationalization process model revisited: From liability of foreignness to liability of outsidership," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 40(9), pages 1411-1431, December.
    14. Das, T. K. & Teng, Bing-Sheng, 2001. "A risk perception model of alliance structuring," Journal of International Management, Elsevier, vol. 7(1), pages 1-29.
    15. Kent Eriksson & Jan Johanson & Anders Majkgård & D Deo Sharma, 1997. "Experimental Knowledge and Costs in the Internationalization Process," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 28(2), pages 337-360, June.
    16. Oliver Hart & John Moore, 1988. "Property Rights and the Nature of the Firm," Working papers 495, Massachusetts Institute of Technology (MIT), Department of Economics.
    17. Raghuram G. Rajan & Luigi Zingales, 1996. "Financial Dependence and Growth," NBER Working Papers 5758, National Bureau of Economic Research, Inc.
    18. John Dunning & Sarianna Lundan, 2008. "Institutions and the OLI paradigm of the multinational enterprise," Asia Pacific Journal of Management, Springer, vol. 25(4), pages 573-593, December.
    19. Heather Berry & Mauro F Guillén & Nan Zhou, 2010. "An institutional approach to cross-national distance," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 41(9), pages 1460-1480, December.
    20. Raghuram G. Rajan & Luigi Zingales, 1994. "What Do We Know About Capital Structure? Some Evidence from International Data," NBER Working Papers 4875, National Bureau of Economic Research, Inc.
    21. Malhotra, Shavin & Sivakumar, K. & Zhu, PengCheng, 2011. "Curvilinear relationship between cultural distance and equity participation: An empirical analysis of cross-border acquisitions," Journal of International Management, Elsevier, vol. 17(4), pages 316-332.
    22. Rosalie L Tung & Alain Verbeke, 2010. "Beyond Hofstede and GLOBE: Improving the quality of cross-cultural research," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 41(8), pages 1259-1274, October.
    23. Slangen, Arjen H.L. & van Tulder, Rob J.M., 2009. "Cultural distance, political risk, or governance quality? Towards a more accurate conceptualization and measurement of external uncertainty in foreign entry mode research," International Business Review, Elsevier, vol. 18(3), pages 276-291, June.
    24. Stroup, Michael D., 2007. "Economic Freedom, Democracy, and the Quality of Life," World Development, Elsevier, vol. 35(1), pages 52-66, January.
    25. Yigang Pan, 2002. "Equity Ownership in International Joint Ventures: The Impact of Source Country Factors," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 33(2), pages 375-384, June.
    26. Chadee, Doren D. & Qiu, Feng, 2001. "Foreign ownership of equity joint ventures in China: a pooled cross-section-time series analysis," Journal of Business Research, Elsevier, vol. 52(2), pages 123-133, May.
    27. Oxley, Joanne E, 1997. "Appropriability Hazards and Governance in Strategic Alliances: A Transaction Cost Approach," Journal of Law, Economics and Organization, Oxford University Press, vol. 13(2), pages 387-409, October.
    28. Tailan Chi, 1996. "Performance Verifiability and Output Sharing in Collaborative Ventures," Management Science, INFORMS, vol. 42(1), pages 93-109, January.
    29. Jean‐Paul Roy, 2012. "IJV Partner Trustworthy Behaviour: The Role of Host Country Governance and Partner Selection Criteria," Journal of Management Studies, Wiley Blackwell, vol. 49(2), pages 332-355, 03.
    30. Douglass C. North, 2005. "Introduction to Understanding the Process of Economic Change," Introductory Chapters, in: Understanding the Process of Economic Change Princeton University Press.
    31. Ainuddin, R. Azimah & Beamish, Paul W. & Hulland, John S. & Rouse, Michael J., 2007. "Resource attributes and firm performance in international joint ventures," Journal of World Business, Elsevier, vol. 42(1), pages 47-60, March.
    32. Anoop Madhok, 2006. "How much does ownership really matter? Equity and trust relations in joint venture relationships," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 37(1), pages 4-11, January.
    33. Paul W Beamish & John C Banks, 1987. "Equity Joint Ventures and Theory of the Multinational Enterprise," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 18(2), pages 1-16, June.
    34. Barzel,Yoram, 1997. "Economic Analysis of Property Rights," Cambridge Books, Cambridge University Press, number 9780521597135, December.
    35. George Baker & Robert Gibbons & Kevin J. Murphy, 2002. "Relational Contracts and the Theory of the Firm," The Quarterly Journal of Economics, Oxford University Press, vol. 117(1), pages 39-84.
    36. Benjamin Gomes-Casseres, 1990. "Firm Ownership Preferences and Host Government Restrictions: An Integrated Approach," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 21(1), pages 1-22, March.
    37. Sethi, Deepak & Judge, William, 2009. "Reappraising liabilities of foreignness within an integrated perspective of the costs and benefits of doing business abroad," International Business Review, Elsevier, vol. 18(4), pages 404-416, August.
    38. Gelbuda, Modestas & Meyer, Klaus E. & Delios, Andrew, 2008. "International business and institutional development in Central and Eastern Europe," Journal of International Management, Elsevier, vol. 14(1), pages 1-11, March.
    39. Jongwook Kim & Joseph T. Mahoney, 2005. "Property rights theory, transaction costs theory, and agency theory: an organizational economics approach to strategic management," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 223-242.
    40. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
    41. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817.
    42. Oded Shenkar, 2001. "Cultural Distance Revisited: Towards a More Rigorous Conceptualization and Measurement of Cultural Differences," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 32(3), pages 519-535, September.
    43. Snejina Michailova & Kate Hutchings, 2006. "National Cultural Influences on Knowledge Sharing: A Comparison of China and Russia," Journal of Management Studies, Wiley Blackwell, vol. 43(3), pages 383-405, 05.
    44. Hogan, Teresa & Hutson, Elaine, 2005. "Capital structure in new technology-based firms: Evidence from the Irish software sector," Global Finance Journal, Elsevier, vol. 15(3), pages 369-387, February.
    45. Yigang Pan, 1996. "Influences on Foreign Equity Ownership Level in Joint Ventures in China," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 27(1), pages 1-26, March.
    46. Keith D Brouthers, 2013. "A retrospective on: Institutional, cultural and transaction cost influences on entry mode choice and performance," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 44(1), pages 14-22, January.
    47. Harris, Milton & Raviv, Artur, 1991. " The Theory of Capital Structure," Journal of Finance, American Finance Association, vol. 46(1), pages 297-355, March.
    48. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    49. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
    50. Harry G Barkema & Freek Vermeulen, 1997. "What Differences in the Cultural Backgrounds of Partners Are Detrimental for International Joint Ventures?," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 28(4), pages 845-864, December.
    51. Henisz Witold J. & Williamson Oliver E., 1999. "Comparative Economic Organization—Within and Between Countries," Business and Politics, De Gruyter, vol. 1(3), pages 261-278, December.
    52. Jaideep Anand & Andrew Delios, 1997. "Location Specificity and the Transferability of Downstream Assets to Foreign Subsidiaries," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 28(3), pages 579-603, September.
    53. Klaus E. Meyer & Saul Estrin & Sumon Kumar Bhaumik & Mike W. Peng, 2009. "Institutions, resources and entry strategies in emerging economies," LSE Research Online Documents on Economics 4217, London School of Economics and Political Science, LSE Library.
    54. Yoram Barzel, 2005. "Organizational Forms and Measurement Costs," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 161(3), pages 357-357, September.
    55. Ingmar Björkman & Günter K Stahl & Eero Vaara, 2007. "Cultural differences and capability transfer in cross-border acquisitions: the mediating roles of capability complementarity, absorptive capacity, and social integration," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 38(4), pages 658-672, July.
    56. Merchant, Hemant, 2005. "The structure-performance relationship in international joint ventures: a comparative analysis," Journal of World Business, Elsevier, vol. 40(1), pages 41-56, February.
    57. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    58. Geert Hofstede & Cheryl A Van Deusen & Carolyn B Mueller & Thomas A Charles, 2002. "What Goals Do Business Leaders Pursue? A Study in Fifteen Countries," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 33(4), pages 785-803, December.
    59. W. J. Henisz, 2000. "The Institutional Environment for Economic Growth," Economics and Politics, Wiley Blackwell, vol. 12(1), pages 1-31, 03.
    60. Barzel, Yoram, 1982. "Measurement Cost and the Organization of Markets," Journal of Law and Economics, University of Chicago Press, vol. 25(1), pages 27-48, April.
    61. repec:kap:iaecre:v:15:y:2009:i:4:p:378-392 is not listed on IDEAS
    62. Luo, Yadong & Shenkar, Oded, 2011. "Toward a perspective of cultural friction in international business," Journal of International Management, Elsevier, vol. 17(1), pages 1-14, March.
    63. Kaufmann, Jeffrey B. & O'Neill, Hugh M., 2007. "Do culturally distant partners choose different types of joint ventures?," Journal of World Business, Elsevier, vol. 42(4), pages 435-448, December.
    64. Williamson, Oliver E, 1979. "Transaction-Cost Economics: The Governance of Contractural Relations," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 233-261, October.
    65. Keith D Brouthers, 2002. "Institutional, Cultural and Transaction Cost Influences on Entry Mode Choice and Performance," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 33(2), pages 203-221, June.
    66. Linda Longfellow Blodgett, 1991. "Partner Contributions as Predictors of Equity Share in International Joint Ventures," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 22(1), pages 63-78, March.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:eee:riibaf:v:31:y:2014:i:c:p:212-233. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.