Formation Of International Joint Ventures Research Articles

Determinants of capital structure

Capital structure has attracted intense debate and scholarly attention in the financial management arena over the past four decades. However, in the context of sub‐Saharan Africa capital structure has received a scant attention. This paper attempts to rectify this position by considering the firm specific factors influencing the capital structure of international joint venture formation based on a sample of 41 firms in Ghana with partners from Western Europe, North America and Asia. The results indicate that size of joint venture, type of joint venture industry and ownership level of joint venture partner have a positive bearing on the capital structure of joint ventures in Ghana.

Learning to manage international joint ventures

This paper identifies the key lessons of managing international joint ventures (IJVs) from the perspectives of IJV experienced partners and managers. The study adopts a multi-method personal interview and self-administered questionnaire approach to identify the major management lessons. Broadly, the response categories are grouped into three distinct areas of learning: (1) the management of the IJV formation process; (2) management of the boundary relationship between partners; and (3) the management of the operation of the IJV. The paper elucidates the lessons regarding these three areas of IJV management and provides a set of propositions for future research.

A goal programming model for partner selection decisions in international joint ventures

The formation of International Joint Ventures (IJVs) has become a widely used mode of international expansion. The selection of the appropriate partner constitutes one of the major factors of success for the IJV. There have been several research efforts, which were concerned with the study of criteria needed for the selection of a partner but not with the development of an appropriate quantitative model. The objective of this paper is to present a quantitative model, based on the goal programming technique, which uses appropriate criteria to evaluate potential candidates and leads to the selection of the optimal partner.

Partnering with Foreign Firms: How Do Chinese Managers View the Governance and Importance of Contracts?

It is a widespread perception that the role of contract in Chinese society is limited because obligations often derive from personal relationships. It is not clear how Chinese managers view the governance and importance of contracts when they deal with foreign counterparts in their joint ventures. To addresses this issue, this study proposes and verifies the governance structure and performance implications of interpartner contracts in a setting of international joint ventures (IJVs). Extant research on IJVs has extensively examined IJV performance but inadequately assessed how this performance is influenced by contractual design. Our analysis of 114 sample IJVs in China suggests that the governance structure of an IJV contract includes four dimensions, namely, issue inclusiveness, term specificity, contingency adaptability, and contractual obligatoriness. Each of these dimensions is validated to be important to IJV formation, interpartner cooperation, and process efficiency as perceived by Chinese managers working in IJVs.

International Joint Ventures and Shareholder Value Creation: Evidence from Manufacturing and Non-manufacturing Sectors

Numerous empirical studies have suggested that the economic performance of international joint ventures (IJVs) is modest, at best. This suggestion may be inaccurate, however, since the studies' findings are based on ex post managerial perceptions of IJV performance that are found to be biased. Stated differently, there is a need to investigate IJV performance from ex ante “external* perspective—that of capital markets. Consequently, this study investigates the extent to which IJVformation announcements increase the shareholder value pf participating firms. Despite the merits of engaging a capital markets' perspective, it is necessary to investigate the extent to which capital markets are informationally ‘efflcient’- particularly given persistent doubts about whether capital markets really are as efficient as is widely accepted. Hence, this study compares IJV&' expected performance with their actual performance that is reported in other empirical studies. This study engages the event-study methodology to examine the impact of IJV formation announcements on the shareholder value of IJV parents, and tries to circumvent the methodology's principal limitations in doing so. Based on a sample of more than 500 IJVs, the study's findings indicate participation in IJVs increases parents' shareholder value by an average of approximately one per cent, albeit this figure varies across industry sectors (manufacturing; non-manufacturing) and firm size (large; small). Shareholder value is created for about 50 per cent Of firms in the sample. Moreover, the study's findings suggest that capital markets are informationally efficient

Imitative innovation and international joint ventures: a dynamic analysis

In this paper we deal with some dynamic issues of international joint venture in the context of a developing country. We provide a rationale for international joint venture formation, as well as its subsequent instability, where instability is interpreted as payoff readjustments between the partners in the venture. Although the joint venture is formed in response to government restrictions on foreign equity holdings in the first period, its subsequent instability is caused by both the change in government policy, as well as the outcome of imitative technological innovation undertaken by the host partner. It is also shown that uncertainty about the government policy in the second period plays an important role in the formation of joint venture in the first period.

International joint venture, licensing and buy-out under asymmetric information

In an asymmetric information framework, this paper deals with the issue of instability of international joint ventures in the context of developing countries. We provide a rationale for international joint venture formation as opposed to licensing, and also its subsequent instability. The joint venture is formed in response to government restriction on foreign equity holdings in the first period. However, the joint venture becomes unstable in the second period, when the government removes the foreign equity restriction. We also provide a new justification for the transfer of an inferior technology in the present framework.

Strategic Motives and Partner Selection Criteria in International Joint Ventures in Turkey

This paper provides an analysis of two important aspects of international joint venture (IJV) activity between Western MNEs and local partner firms in Turkey. First, the strategic motives for IJV formation are investigated from the comparative perspective of Western firms and local partners. As hypothesised a number of significant differences are found in the relative importance of strategic motives between foreign partner firms and Turkish partner firms. Second, the paper considers criteria used by Western firms and Turkish firms when selecting IJV partners. As hypothesised a number of significant differences are found in the relative importance of selection criteria between foreign partner firms and Turkish partner firms. Third, the paper considers the relationship between selection criteria and strategic motives by examining a multiple regression model using the factors of selection criteria and the factors of strategic motives as dependent and independent variables respectively. There is some support for the hypothesis that the relative importance of the selection criteria varies with the strategic motives of the IJV.

Parent Firm Performance across International Joint Venture Life-cycle Stages

The benefits that firms obtain from investing in international joint ventures (IJVs) can be reinforced or reduced by the management of later stages of collaboration. This paper presents an analysis of the shareholder wealth effects of IJV formation and five types of IJV termination. The empirical findings challenge common assumptions in the IJV literature, contrast prior evidence on the performance implications of market entry and exit through acquisitions and divestitures, and demonstrate the value of integrating IJV life-cycle stages in future research.

Toward a conceptual framework of international joint venture negotiations

Knowledge about determinants, processes, and outcomes of negotiation can help international business managers employ appropriate collaborative strategies that will result in maximum benefits. This article tackles a prominent issue in the dynamic, evolutionary process of international joint venture (IJV) development: contract negotiations during IJV formation. Building on a sociopsychological perspective together with transaction cost theory, this article presents an integrated conceptual framework on IJV negotiations in a general context where relevant antecedent, concurrent, and consequent factors are interlocked and mutually influential in sequence. It articulates three levels of antecedents of IJV negotiations (environmental, organizational, and individual), three core concurrent factors (term specificity, issue diversity, and contractual obligability, and three sequential consequences including the immediate outcome (IJV formation satisfaction), intermediate effect (IJV process performance), and ultimate effect (IJV overall performance). The interrelationships among them are proposed.

International Joint Venture Formation: the Financial Services Sector

This article considers entry strategies for intertnational markets with specific reference to joint ventures in the financial services sector. A range of descriptive statistics relating to international joint venture formation between UK firms and those of the Triad are reported for the period 1980 to 1989. These data illustrate a dramatic shift of emphasis from US to Western European partners during the second half of the decade. While UK firms show a distinct preference for equity joint ventures only occusionally do they achieve a controlling Interest.

The Health of Nations

Since 1985, notes a recent McKinsey & Co. study, the formation of international joint ventures involving American corporations has increased by 27% a year. However, the study adds, at least a third of those fail to meet the expectations of the companies involved.

Public policy influences on the formation of international joint ventures

The literature on international joint ventures (IJVs) and “strategic alliances” has devoted little attention to the reasons for the recent growth in their number and importance. Where IJVs have been discussed, most scholars have emphasized changes in the competitive and technological environment as causal factors. For example, Hagedoorn and Schakenraad (1990) argue that domestic and international strategic alliances burgeoned during the 1970s and 1980s because of the need to shorten development times for new products and because of growing complementarities among previously separate technologies.