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Optimal ownership in joint ventures with contributions of asymmetric partners

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  • Marinucci, Marco

Abstract

This paper faces two questions concerning Joint Ventures (JV) agreements. First, we study how the partners contribution affect the creation and the profit sharing of a JV when partners' effort is not observable. Then, we see whether such agreements are easier to enforce when the decision on JV profit sharing among partners is either delegated to the independent JV management (Management Sharing) or jointly taken by partners (Coordinated Sharing). We find that the firm whose effort has a higher impact on the JV's profits should have a larger profit shares. Moreover, a Management sharing ensures, at least in some cases, a wider range of self-enforceable JV agreements.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 9058.

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Date of creation: Apr 2008
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Handle: RePEc:pra:mprapa:9058
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Keywords: D43; L13; L14; L22;

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Find related papers by JEL classification:
  • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
  • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
  • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
  • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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  1. Anbarci, Nejat & Lemke, Robert & Roy, Santanu, 2002. "Inter-firm complementarities in R&D: a re-examination of the relative performance of joint ventures," International Journal of Industrial Organization, Elsevier, vol. 20(2), pages 191-213, February.
  2. Oliver Hart & Sanford Grossman, 1985. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Working papers 372, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Linda Longfellow Blodgett, 1991. "Partner Contributions as Predictors of Equity Share in International Joint Ventures," Journal of International Business Studies, Palgrave Macmillan, vol. 22(1), pages 63-78, March.
  4. Ping Lin & Kamal Saggi, 2004. "Ownership Structure and Technological Upgrading in International Joint Ventures," Review of Development Economics, Wiley Blackwell, vol. 8(2), pages 279-294, 05.
  5. d'Aspremont, Claude & Jacquemin, Alexis, 1988. "Cooperative and Noncooperative R&D in Duopoly with Spillovers," American Economic Review, American Economic Association, vol. 78(5), pages 1133-37, December.
  6. Nakamura, Masao, 2005. "Joint venture instability, learning and the relative bargaining power of the parent firms," International Business Review, Elsevier, vol. 14(4), pages 465-493, August.
  7. Oliver Hart & John Moore, 1988. "Property Rights and the Nature of the Firm," Working papers 495, Massachusetts Institute of Technology (MIT), Department of Economics.
  8. Elizabeth Asiedu & Hadi Salehi Esfahani, 2001. "Ownership Structure In Foreign Direct Investment Projects," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 647-662, November.
  9. Shige Makino & Paul W Beamish, 1998. "Performance and Survival of Joint Ventures with Non-Conventional Ownership Structures," Journal of International Business Studies, Palgrave Macmillan, vol. 29(4), pages 797-818, December.
  10. Paul Belleflamme & Francis Bloch, 2000. "Optimal Ownership Structures in Asymmetric Joint Ventures," Working Papers 411, Queen Mary University of London, School of Economics and Finance.
  11. Sugato Bhattacharyya & Francine Lafontaine, 1995. "Double-Sided Moral Hazard and the Nature of Share Contracts," RAND Journal of Economics, The RAND Corporation, vol. 26(4), pages 761-781, Winter.
  12. Yannis Caloghirou & Stavros Ioannides & Nicholas S. Vonortas, 2003. "Research Joint Ventures," Journal of Economic Surveys, Wiley Blackwell, vol. 17(4), pages 541-570, 09.
  13. Thomas H. Noe & Michael J. Rebello & Milind M. Shrikhande, 2002. "Structuring International Cooperative Ventures," Review of Financial Studies, Society for Financial Studies, vol. 15(4), pages 1251-1282.
  14. Hagedoorn, John & Link, Albert N. & Vonortas, Nicholas S., 2000. "Research partnerships1," Research Policy, Elsevier, vol. 29(4-5), pages 567-586, April.
  15. Reinhilde Veugelers & Katrien Kesteloot, 1996. "Bargained shares in joint ventures among asymmetric partners: Is the matthew effect catalyzing?," Journal of Economics, Springer, vol. 64(1), pages 23-51, February.
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Cited by:

  1. Hiroshi Osano, 2011. "Partial Ownership and Strategic Alliances with Reallocation of Corporate Resources," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 167(2), pages 202-223, June.
  2. ROELS, Guillaume & CHEVALIER, Philippe & WEI, Ying, 2012. "United we stand? Coordinating capacity investment and allocation in joint ventures," CORE Discussion Papers 2012045, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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