Joint Venture Partners Research Articles

An Alternative Quantitative and Qualitative Analytical Tool to Evaluate Joint-Venture Negotiations: The Joint-Venture Negotiation Box (JVN-BOX)

In this article, we introduce the Joint-Venture Negotiation Box (JVN-Box), a new methodological approach to evaluate the negotiation between two players in a joint-venture partnership. The JVN-Box primarily calculates a suitable point of balance between two players and hence, generates harmony in a joint venture partnership. Since the division between players always depends on the opportunity cost and incentives in the process of negotiation, the study proposes the need for players to diligently engage in formal discussions to find the most suitable point of balance to consolidate a joint venture partnership. The JVN-Box helps to find that suitable balance point and hinges the success of any joint venture negotiation between two players on the effort of hard work by the weak player to step up and sacrifice welfare to step down from the stronger player.

국제합작기업 파트너 특성, 제휴몰입도, 그리고 합작기업성과의 관계에 대한 연구: 중국 소재 국제합작기업을 중심으로

국제합작기업 파트너 특성, 제휴몰입도, 그리고 합작기업성과의 관계에 대한 연구: 중국 소재 국제합작기업을 중심으로

Class Action Spillover Effects on Joint Venture Partners

Firms exhibit a US$106MM average market capitalization decline when a Securities Class Action lawsuit against their joint venture partner is announced. After their partner’s lawsuit, their own probability of facing similar litigation increases from 4.12% to 7.52%. Such litigation is 1.3 times more likely for every common monitor (auditor, institutional blockholder, or analyst) non-sued venture firms share with their sued partner. Other spillovers to non-sued venture firms substantially affect their financial reporting practices, their investment policies, and their assessment by both analysts and auditors. While these venture firms are not named in their partner’s complaint, they suffer non-trivial spillover effects.

Cost recovery: when reducing costs for an asset can increase costs for an operator

In an unpredictable environment, oil and gas companies within Australia need to reduce their cost of production in order to protect the company’s margins. Many large companies are doing this by adapting a traditional asset-based operating model to be a central functionally aligned model, and creating synergies through offshoring, outsourcing, combining corporate capabilities across global assets, and/or creating centres of excellence. A functionally aligned centralised operating model, however, has the potential to increase the complexity for companies when recovering costs from their joint venture partners. In order to be recoverable, an operator must prove that the costs incurred are still directly related to the asset and by moving functions away from the front line, attribution to assets can be complex. If not allocated, documented and communicated in line with the joint venture agreements, the recoverability of these costs is put at risk. It could, therefore, eventuate that the reduction of costs for an asset results in an increase of costs for the operator. When assessing the recoverability of costs, operators should consider: (i) documenting the end to end cost allocation process and communicate this with joint venture partners; (ii) embedding robust governance and tools to aid cost transparency; and (iii) reviewing their contractual obligations as operations evolve. If the appropriate steps are taken, an operator can reduce costs without increasing their own costs by putting recoverability at risk.

International Joint Ventures and Internal vs. External Technology Transfer: Evidence from China

This paper studies international joint ventures, where foreign direct investment is performed by a foreign and a domestic firm that together set up a new firm, the joint venture. Employing administrative data on all international joint ventures in China from 1998 to 2007-roughly a quarter of all international joint ventures in the world-we find, first, that Chinese firms chosen to be partners of foreign investors tend to be larger, more productive, and more likely subsidized than other Chinese firms. Second, there is substantial technology transfer both to the joint venture and to the Chinese joint venture partner, an external, intergenerational technology transfer effect that this paper introduces. Third, with technology spillovers typically outweighing negative competition effects, joint ventures generate on net positive externalities to other Chinese firms in the same industry. Joint venture externalities are large, perhaps twice the size of wholly-owned FDI spillovers, and it is R&D-intensive firms, including the joint ventures themselves, that benefit most from these externalities. Furthermore, the positive external joint venture effect is larger if the foreign firm is from the U.S. rather than from Japan or Hong Kong, Macau, and Taiwan, while this effect is virtually absent in broad sectors that include economic activities for which China's FDI policy has prohibited joint ventures.

Network information and cross‐border M&A activities

Research SummaryHow information about social networks affects firms’ global expansion is an important but rarely investigated question. We argue that different sources of network information will affect a firm's investment activities in the global market, but their relative importance may vary. Moreover, the influence of network information can be bounded by the global trade network. The results from a sample of cross‐border merger and acquisition (M&A) activities conducted by U.S. publicly listed firms reveal that although M&A experience of both interlocking and joint venture partners affects the focal firm's global expansion, the effect of interlocking partners is more influential than joint venture partners. Meanwhile, when mutual trade dependence between countries is high, the positive effect of network information from board interlocks diminishes.Managerial SummaryFirms are hesitant to engage in cross‐border M&As, because it is difficult for them to get information about local business practices and environmental idiosyncrasies. This study shows that firms can deal with this challenge by accessing relevant information from the M&A experience of interlocking partners and joint venture partners. The information generated from the M&A experience of interlocking partners is even more valuable and important than that of joint venture partners in shaping firms’ cross‐border M&A decisions. Moreover, the M&A experience of interlocking partners and joint venture partners is particularly valuable for firms contemplating M&A activities in a country with relatively fewer buyer‐seller exchange networks with their home country.

Embracing complexity: Learning from minority, 50-50, and majority joint venture experience

Learning from joint venture (JV) experience is commonly viewed as a way to improve JV performance. However, many JVs are complex and difficult to learn from. How can firms embrace this complexity to realize the learning potential of their JV experience? To answer this question, we consider how minority, 50-50, and majority JVs differ in terms of complexity stemming from the interdependencies between the JV partners and between the JV and its parent organizations. We theorize that the relatively limited complexity of minority JV experience facilitates learning from more complex experience with majority and 50-50 JVs. However, the same facilitating effect is not expected between two forms of complex experience. We test these predictions on a comprehensive set of equity JVs formed by Dutch listed companies between 1966 and 2005, using JV survival and abnormal stock market returns as complementary JV performance measures.

Traditional farm expansion versus joint venture remote partnerships

Traditionally, farms expand by buying out a neighbour. But might remote partnerships be a better way of expanding a farm business given projected climate change and price volatility? This question is addressed using farm business financial modelling. Representative farms at 27 locations in Western Australia are constructed to enable comparison of the value of buying out a neighbour versus expansion using geographically distant joint venture (JV) partners. The farm models consider economies of size, bulk purchase price discounts, the variability and correlation of returns associated with farm expansion, and impacts of climate change. Random selection of a remote partner generates little improvement in wealth; on average only 2.3 and 1.6 per cent, respectively, under current and projected future climate across all locations. However, there is large variation in wealth appreciation opportunities for each location and between locations. Preferred partnerships are a function of each farm's characteristics. Locations highly preferred as JV partners under current climate are similarly preferred partners under projected future climate. The main sources of additional wealth come from economies of size advantages, risk‐spreading benefits of combining geographically separated farms and bulk discounts. Farmers seeking business expansion will often benefit greatly from careful selection of a remote partner.

Applying complexity theory to explain partner cooperation: The role of transaction cost‐related factors and elements of relational exchanges

AbstractUsing complexity theory, we seek to better understand the configurations of causal factors stimulating joint ventures' cooperation in Chinese manufacturing context. To this end, we adopt two dominant perspectives of transaction cost economics and relational exchange theory to identify transaction cost‐related factors and elements of relational exchanges as critical factors in joint ventures' cooperation. We apply fuzzy‐set qualitative comparative analysis on a sample of 268 joint venture partners to test research propositions. The findings indicate a need for competence trust and goodwill trust and also show that extorting rent cost should be emphasized. Results reveal those six configurations of causal factors that explain high intention to cooperate. Copyright © 2017 ASAC. Published by John Wiley & Sons, Ltd.

Productivity and participation values for cooperative goals to limit free riding and promote performance in international joint ventures

This study holds that the development of cooperative goals instead of competitive goals among joint venture partners helps to limit free riding and promote performance in IJVs. The results collected from 75 pairs of Chinese and foreign joint venture partners suggest that productivity and participation values strengthen the partners’ beliefs that their goals are cooperatively related, which in turn, reduces free riding and promotes performance, whereas competitive goals promote free riding and obstruct joint performance. The paper also suggests how cooperation and competition research can complement established theoretical frameworks on the conditions and dynamics that result in IJV productivity.

Heineken's Acquisition of Asia Pacific Breweries: Accounting for Business Combinations and Changes in Ownership Interests

ABSTRACT On July 20, 2012, Heineken, a Dutch brewery offered S$5.125 billion (Singapore dollars; approximately US$4.1 billion) to buy Asia Pacific Breweries Ltd (APB; formerly, Malayan Breweries Limited) from its Singapore-based joint venture partner, Fraser and Neave, Limited. (F&N). At that point, Heineken and F&N had joint control over APB through the joint venture vehicle Asia Pacific Investments Pte Ltd (APIPL). Brewery business under the joint arrangement had moved on quite predictably from the time APB was formed in 1931. However, the calm changed to high drama when Thai Beverage, owned by one of Thailand's tycoons, made a bid for F&N and APB. Heineken was quick to respond by aggressively buying shares of APB, leading to a large control premium being paid in the final offer price. The bidding war was largely motivated by the Dutch and Thai beer giants, each wanting to own the iconic Tiger beer brand that was owned by APB and thus take control of APB's strong market share in the fast-growing market of Asia. The Heineken bid for APB presents an interesting case study regarding the motivations for acquisitions, the nature of control, and accounting for acquisitions. The case also presents rich issues in accounting for changes in ownership interests with and without gain of control.

On the rim of inspiration: performance of AWF tourism enterprises in Botswana and Rwanda

ABSTRACTCommunity-based natural resource management approaches including joint venture partnerships provide opportunities to achieve biodiversity conservation and associated tourism development. The African Wildlife Foundation (AWF) conservation enterprise model aims to improve the quality of life of communities and promote positive local attitudes towards conservation, and has been used to establish conservation lodges. To date, there has been no assessment of the performance of the conservation lodges in relation to this aim. This study used two case study AWF-initiated conservation lodges in Rwanda and Botswana to assess the performance of these conservation enterprises. The study adopted one-on-one structured questionnaire interviews with lodge staff and community residents. Analysis of economic and social performance and attitudes to conservation indicates that rural communities within the vicinity of the conservation lodges are generally benefitting from the existence of the lodges and associated tourism activity although to varying degrees, as well as promoting positive conservation attitudes among the community.

Flexibility in Modification and Termination of Cross-Border Joint Ventures

The paradigms of transaction cost and social exchange are instrumental in developing joint venture research as well as its impact on flexibility of partners. However, extant research is scant regarding the type of flexibility that partners in joint venture are most impacted. In this study, we analyze the flexibility determinants in a sample of Indian cross-border joint ventures with G8 nations’ partner firms. The factors in the study as determinants of flexibility—termination flexibility and modification flexibility—are resource heterogeneity, trust, prior joint venture relationship, foreign equity, cultural distance, asymmetry in motives and foreign equity. We adopt a structural equation modeling approach for the study.

Citigroup's Shareholder Tango in Brazil (A)

Citigroup has discovered that Daniel Dantas, hired five years earlier to manage Citigroup's $750 million private equity investment in a Brazilian telecommunications industry joint venture, has allegedly mismanaged more than $300 million in assets and contracts. Dantas's misconduct relates to his management of Citigroup's CVC Fund and II-FIA, a legal entity representing a group of large Brazilian pension funds. Together with Dantas's Grupo Opportunity, CVC and II-FIA own Brasil Telecom, the third largest telecommunications company in the country. The partnership's pyramidal ownership structure makes his actions difficult to track. Citigroup must quickly determine how to disrupt Dantas's intricately woven web of control without allowing him to extract further value from the partnership. This case provides concrete examples of the expropriation risks joint venture partners face when unfamiliar with pyramidal group ownership structures. Understand and recognize governance-based differences between a pyramidal business group (e.g., the joint venture related to Brasil Telecom) and that of a widely held firm (i.e., a typical U.S. firm's ownership structure); understand that to avoid market failure firms must anticipate and adjust to the non-market institutional “rules of the game,” which vary greatly across nations; and understand the range of strategic choices and their optimal application to protect minority shareholder rights.

Citigroup's Shareholder Tango in Brazil (B)

Citigroup has discovered that Daniel Dantas, hired five years earlier to manage Citigroup's $750 million private equity investment in a Brazilian telecommunications industry joint venture, has allegedly mismanaged more than $300 million in assets and contracts. Dantas's misconduct relates to his management of Citigroup's CVC Fund and II-FIA, a legal entity representing a group of large Brazilian pension funds. Together with Dantas's Grupo Opportunity, CVC and II-FIA own Brasil Telecom, the third largest telecommunications company in the country. The partnership's pyramidal ownership structure makes his actions difficult to track. Citigroup must quickly determine how to disrupt Dantas's intricately woven web of control without allowing him to extract further value from the partnership. This case provides concrete examples of the expropriation risks joint venture partners face when unfamiliar with pyramidal group ownership structures.(1) Understand and recognize governance-based differences between a pyramidal business group (e.g., the joint venture related to Brasil Telecom) and that of a widely held firm (i.e., a typical U.S. firm's ownership structure); (2) understand that to avoid market failure firms must anticipate and adjust to the non-market institutional “rules of the game,” which vary greatly across nations; and (3) understand the range of strategic choices and their optimal application to protect minority shareholder rights.

The role of structure in manipulating PPP accountability

PurposeThe purpose of this paper is to examine the accounting and governance of public private partnerships (PPPs) that are structured as joint venture partnerships. Drawing on Giddens’ structuration theory, the paper examines how human agents interact with these joint venture structures and analyses the effects on financial disclosures and public accountability for taxpayers’ investments.Design/methodology/approachThe authors adopt a cross-case analysis to investigate two such PPP schemes, which form part of the UK’s programme of investment in primary healthcare, known as the Local Improvement Finance Trust (LIFT) policy. The authors employ a combination of interviews and analysis of financial statements and publicly available official documents.FindingsThe corporate structure of these LIFT schemes is very complicated so that the financial accounting is opaque. The implication is that the joint venture mechanism cannot be relied upon to deliver transparency of reporting. The paper argues that the LIFT structures are deliberately constructed by human agents to act as barriers to transparency about public expenditure.Practical implicationsThe financial reporting undermines public accountability and transparency as both are necessarily restricted. Policy makers should pay attention to not only the private sector technologies but also the manner in which structures are used to reduce transparency and consequently undermine public accountability.Originality/valueThe paper provides detailed analysis from the perspective of structuration theory to show how human agents use structures to impact on financial reporting and public accountability.

Application of fuzzy group analytic hierarchy process in partner selection of international joint venture projects

Partner selection is gradually recognized as an essential factor in gaining success in a cooperative settings. In this paper, a novel approach based on fuzzy AHP group decision-making for partner selection of joint venture projects is proposed. In this approach, rst, the in uential factors for selection of appropriate partners based on literature review and interviews with experts are identi ed. Then, using a method considering the risk, knowledge, and educational background of decision-makers, the impact of decision-makers is calculated. Pairwise comparison matrices are performed, and the weights of criteria are calculated based on two methods (multiplicative and additive). Then, the calculated weights of criteria and the potential partners have been ranked via an ecient ranking index. Finally, the application of this methodology to a real case study in National Iranian Petrochemical Company (NPC) is conducted. The contribution of this study is developing a fresh systematic approach for partner selection of international joint ventures and application in a real-life case study to present an operational guideline to the petrochemical industries. The results of this study reveal that the equipment of the partner, its nancial capacity, trusts and management skills are the most important criteria for establishing the durable partners in the international joint venture of NPC.

An Integrated Construction Management Approach for Addressing LEED Project Challenges

Notwithstanding the progress that has been made in the Leadership in Energy and Environmental Design (LEED) program, engineering and construction professionals express frustrations with meeting the stringent criteria required to earn LEED building certifications. Without effective management practices, LEED project challenges can minimize the capacity of construction organizations to achieve LEED project certifications in a cost-effective and timely manner. The main purpose of this study is to explore LEED project challenges and develop an integrated construction management approach for minimizing LEED challenges. A mixed method approach utilizing surveys and a case study was adopted for this research project. Responses obtained from surveys completed by construction professionals were clustered into common themes and analyzed. Furthermore, interviews and LEED project document reviews were employed to examine the management practices implemented by joint venture partners on an ongoing LEED project. Results revealed four clusters of LEED challenges: Constructing LEED buildings (43%); Tracking LEED credits (26%); Understanding LEED requirements (22%); and Accessing LEED resources (9%). Drawing from these results and the case study, an integrated construction management approach for enhancing LEED project success was developed. The key components of this approach are project-specific, organization, and industry-wide practices. This approach should reduce LEED project challenges, and improve LEED project success.

Sound business practice

Emma White profiles a Specsavers Hearing Centre and discusses the company's engagement in audiology with joint venture partner Aekta Patel.

Universities as partners in research joint ventures

Sustainable economic growth depends on a continual flow of innovations that depends in turn on a continual flow of knowledge. While empirical evidence suggests that universities can play a significant role in the creation and dissemination of that knowledge, little is known of the characteristics of research joint ventures involving universities. One of the few studies to investigate this issue is Link and Scott (Research Policy 34:385–393, 2005), which found a positive relationship between university participation in RJVs and the size of RJVs which they attributed to universities providing higher marginal value and lower appropriability problems to larger RJVs. Boardman and Bozeman (Economics of Innovation and New Technology 15:51–69, 2006), however, suggests that the explanation might be more complex and not necessarily associated with profit maximization. The purpose of this paper is to present a theoretical model based on a profit-maximizing approach of the decision to invite a university to participate in an RJV that can serve as a foundation for future empirical work, an exploration of the relative explanatory power of a profit-maximizing approach, and a framework for evaluating empirically the policy implications of the Link and Scott’s (Research Policy 34:385–393, 2005) findings.