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Revenue Sharing and Control Rights in Team Production: Theories and Evidence from Joint Ventures.

Author Info

Listed author(s):
  • Chong-En Bai

    ()

  • Zhigang Tao

    ()

  • Changqi Wu

    ()

Abstract

This paper presents a model of the joint venture that is grounded in the stylized facts we found from a sample of 200 joint venture contracts. The model incorporates the revenue-sharing contract into the incomplete contract frameworks of Grossman-Hart-Moore Property Rights Theory and the Transaction Cost Theory of the firm, and emphasizes the impact of expropriation. Joint control can be optimal as well as unilateral control. Our econometric analysis of the revenue-sharing and control arrangements o?ers strong support to our Property-Rights-Theory motivated model with self investment but rejects that with cooperative investment. The Transaction-Cost-Theory motivated model leaves some important empirical findings unexplained. Our findings also reject some of the existing theories of joint ownership.

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File URL: http://deepblue.lib.umich.edu/bitstream/2027.42/39948/2/wp563.pdf
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Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 2003-563.

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Length: 73 pages
Date of creation: 20 Jun 2003
Handle: RePEc:wdi:papers:2003-563
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Keywords: Joint Ventures; Control Right; Revenue-Sharing Contracts; Expropriation; Theory of the Firm;

Other versions of this item:

Find related papers by JEL classification:
  • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
  • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
  • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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Cited by:

  1. Che, Jiahua & Facchi, Giovanni, 2007. "Cultural Differences, Insecure Property Rights and the Mode of Entry Decision," Economics Discussion Papers 8916, University of Essex, Department of Economics.
  2. Ari Van Assche & Galina A. Schwartz, 2013. "Contracting Institutions and Ownership Structure in International Joint Ventures," CIRANO Working Papers 2013s-04, CIRANO.
  3. Ying Ge & Yasheng Chen, 2008. "Foreign Ownership and Productivity of Joint Ventures," Economic Development and Cultural Change, University of Chicago Press, vol. 56, pages 895-920.
  4. Van Assche, Ari & Schwartz, Galina A., 2013. "Contracting institutions and ownership structure in international joint ventures," Journal of Development Economics, Elsevier, vol. 103(C), pages 124-132.
  5. Cheng, Leonard K. & Qiu, Larry D. & Tan, Guofu, 2005. "Foreign direct investment and international trade in a continuum Ricardian trade model," Journal of Development Economics, Elsevier, vol. 77(2), pages 477-501, August.
  6. Gattai, Valeria & Natale, Piergiovanna, 2013. "What makes a joint venture: Micro-evidence from Sino-Italian contracts," Review of Financial Economics, Elsevier, vol. 22(4), pages 194-205.
  7. Paija, Laura, 2004. "Allocation of Control Rights to Customised Products: Empirical Analysis of Finnish SMEs," Discussion Papers 918, The Research Institute of the Finnish Economy.
  8. Qiangbing Chen, 2010. "Culture distance and foreign equity ownership in international joint ventures: Evidence from China," Journal of Chinese Economic and Foreign Trade Studies, Emerald Group Publishing, vol. 3(3), pages 189-203, October.
  9. Bai, Chong-En & Lu, Jiangyong & Tao, Zhigang, 2010. "Capital or knowhow: The role of foreign multinationals in Sino-foreign joint ventures," China Economic Review, Elsevier, vol. 21(4), pages 629-638, December.
  10. Carluccio, Juan & Bas, Maria, 2015. "The impact of worker bargaining power on the organization of global firms," Journal of International Economics, Elsevier, vol. 96(1), pages 162-181.
  11. Ari Van Assche & Galina A. Schwartz, 2008. "Institutions and Multinational Ownership Strategy," CIRANO Working Papers 2008s-07, CIRANO.
  12. Guillaume Roels & Uday S. Karmarkar & Scott Carr, 2010. "Contracting for Collaborative Services," Management Science, INFORMS, vol. 56(5), pages 849-863, May.
  13. Valeria Gattai & Piergiovanna Natale, 2014. "Joint Ventures and the Property Rights Theory of the Firm: a Review of the Literature," Working Papers 287, University of Milano-Bicocca, Department of Economics, revised Dec 2014.
  14. 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.
  15. Zhang, Xiaoxiang & Wen, Jie, 2016. "The impacts of economic importance difference of a joint venture (JV) held by partners and partners' size difference on the extraction of rivalrous and non-rivalrous private benefits in a JV," International Review of Financial Analysis, Elsevier, vol. 48(C), pages 46-54.

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