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Optimal Ownership Structures in Asymmetric Joint Ventures

Author

Listed:
  • Paul Belleflamme

    (Queen Mary and Westfield College, University of London)

  • Francis Bloch

    (Université Catholique de Louvain)

Abstract

This paper investigates the relation between asymmetries in the distribution of shares in joint ventures and asymmetries between the parent companies. When the joint venture and the parent companies are controlled by separate entities, we provide a simple formula to compute the optimal ownership structure. This formula is applied to various models of market interaction, showing that larger companies should have a larger fraction of shares, and so should companies whose goods are closer substitutes of the product of the joint venture, or companies who have a higher cost of transformation of the input produced by a joint venture.

Suggested Citation

  • 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.
  • Handle: RePEc:qmw:qmwecw:wp411
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    File URL: http://www.econ.qmul.ac.uk/media/econ/research/workingpapers/archive/wp411.pdf
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    Cited by:

    1. Marco Marinucci, 2009. "Optimal ownership in joint ventures with contributions of asymmetric partners," Journal of Economics, Springer, vol. 97(2), pages 141-163, June.
    2. Wang, Susheng & Zhu, Tian, 2016. "Optimality of the 51:49 equity structure," Economics Letters, Elsevier, vol. 145(C), pages 270-273.
    3. Paul Belleflamme, 2000. "R&D Cooperation or Competition in the Presence of Cannibalization," Working Papers 413, Queen Mary University of London, School of Economics and Finance.
    4. HEGE, Ulrich & HAUSWALD, Robert, 2002. "Ownership and control in joint ventures: theory and evidence," Les Cahiers de Recherche 750, HEC Paris.
    5. Dominique Demougin & Oliver Fabel, 2006. "The Division of Ownership in New Ventures," SFB 649 Discussion Papers SFB649DP2006-047, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    6. Moskalev, Sviatoslav A. & Swensen, R. Bruce, 2007. "Joint ventures around the globe from 1990-2000: Forms, types, industries, countries and ownership patterns," Review of Financial Economics, Elsevier, vol. 16(1), pages 29-67.

    More about this item

    Keywords

    Joint ventures; Strategic alliances; Ownership structure; Asymmetries;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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