IDEAS home Printed from https://ideas.repec.org/p/wdi/papers/2003-563.html
   My bibliography  Save this paper

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

Author

Listed:
  • 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.

Suggested Citation

  • Chong-En Bai & Zhigang Tao & Changqi Wu, 2003. "Revenue Sharing and Control Rights in Team Production: Theories and Evidence from Joint Ventures.," William Davidson Institute Working Papers Series 2003-563, William Davidson Institute at the University of Michigan.
  • Handle: RePEc:wdi:papers:2003-563
    as

    Download full text from publisher

    File URL: http://deepblue.lib.umich.edu/bitstream/2027.42/39948/2/wp563.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Daniel H. Rosen, 1999. "Behind the Open Door: Foreign Enterprises in the Chinese Marketplace," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 23.
    2. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-1158, December.
    3. Deborah Minehart & Zvika Neeman, 1999. "Termination and Coordination in Partnerships," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 8(2), pages 191-221, June.
    4. Grossman, Sanford J. & Hart, Oliver D., 1988. "One share-one vote and the market for corporate control," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 175-202, January.
    5. Bengt Holmstrom, 1982. "Moral Hazard in Teams," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 324-340, Autumn.
    6. Klaus Schmidt, 1998. "Sequential Investments and Options to Own," CESifo Working Paper Series 160, CESifo Group Munich.
    7. Raghuram G. Rajan & Luigi Zingales, 1998. "Power in a Theory of the Firm," The Quarterly Journal of Economics, Oxford University Press, vol. 113(2), pages 387-432.
    8. Philippe Aghion & Patrick Bolton, 1992. "An Incomplete Contracts Approach to Financial Contracting," Review of Economic Studies, Oxford University Press, vol. 59(3), pages 473-494.
    9. Georg Noeldeke & Klaus Schmidt, 1998. "Sequential Investments and Options to Own," RAND Journal of Economics, The RAND Corporation, vol. 29(4), pages 633-653, Winter.
    10. Donald B. Hausch & Yeon-Koo Che, 1999. "Cooperative Investments and the Value of Contracting," American Economic Review, American Economic Association, vol. 89(1), pages 125-147, March.
    11. Mathias Dewatripont & Jean Tirole, 1994. "A Theory of Debt and Equity: Diversity of Securities and Manager-Shareholder Congruence," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 1027-1054.
    12. Chu-Chia S. Lin & Ivan Png, 2003. "Monitoring costs and the mode of international investment," Journal of Economic Geography, Oxford University Press, vol. 3(3), pages 261-274, July.
    13. 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.
    14. Claessens, Stijn & Djankov, Simeon & Joseph P. H. Fan & Lang, Larry H. P., 1999. "Expropriation of minority shareholders : evidence from East Asia," Policy Research Working Paper Series 2088, The World Bank.
    15. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 2000. "Investor protection and corporate governance," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 3-27.
    16. David de Meza & Ben Lockwood, 1998. "Does Asset Ownership Always Motivate Managers? Outside Options and the Property Rights Theory of the Firm," The Quarterly Journal of Economics, Oxford University Press, vol. 113(2), pages 361-386.
    17. Chiu, Y Stephen, 1998. "Noncooperative Bargaining, Hostages, and Optimal Asset Ownership," American Economic Review, American Economic Association, vol. 88(4), pages 882-901, September.
    18. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
    19. Harris, Milton & Raviv, Artur, 1988. "Corporate governance : Voting rights and majority rules," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 203-235, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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.
    2. repec:bla:stratm:v:38:y:2017:i:4:p:920-938 is not listed on IDEAS
    3. 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.
    4. repec:bla:jecsur:v:31:y:2017:i:1:p:281-302 is not listed on IDEAS
    5. 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.
    6. Ari Van Assche & Galina A. Schwartz, 2008. "Institutions and Multinational Ownership Strategy," CIRANO Working Papers 2008s-07, CIRANO.
    7. Ari Van Assche & Galina A. Schwartz, 2013. "Contracting Institutions and Ownership Structure in International Joint Ventures," CIRANO Working Papers 2013s-04, CIRANO.
    8. 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.
    9. Guillaume Roels & Uday S. Karmarkar & Scott Carr, 2010. "Contracting for Collaborative Services," Management Science, INFORMS, vol. 56(5), pages 849-863, May.
    10. 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.
    11. 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.
    12. Charlie Joyez, 2017. "Firm heterogeneity and the integration trilemma: The utility of Joint ventures in integration versus outsourcing models," Working Papers DT/2017/09, DIAL (Développement, Institutions et Mondialisation).
    13. 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.
    14. 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.
    15. 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.
    16. 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.
    17. 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.
    18. repec:eee:reveco:v:49:y:2017:i:c:p:515-535 is not listed on IDEAS
    19. Qiangbing Chen & Yali Liu & Lu Jiang, 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.
    20. Charlie Joyez, 2018. "Interaction between firm-level and host-country characteristics and multinationals' integration choices," Working Papers DT/2018/03, DIAL (Développement, Institutions et Mondialisation).

    More about this item

    Keywords

    Joint Ventures; Control Right; Revenue-Sharing Contracts; Expropriation; Theory of the Firm;

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wdi:papers:2003-563. 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: (WDI). General contact details of provider: http://edirc.repec.org/data/wdumius.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.