Joint Venture Ownership Research Articles

Foreign ownership in joint ventures under knowledge leakage risks: The influence of industrial munificence and dynamism

This research investigates the role of industrial munificence and dynamism in foreign ownership of international joint ventures (IJVs) in emerging markets. Based on an investigation of 50,069 observations of IJVs in China, I find that foreign ownership in IJVs increases with industrial munificence and decreases with industrial dynamism in the local market. Moreover, while foreign firms with higher intangible asset intensity tend to hold higher foreign ownership in IJVs, industrial munificence positively moderates this relationship due to its role in enhancing the knowledge leakage risks. Furthermore, the roles of intangible asset intensity, munificence and dynamism on foreign ownership are more observable in industries with medium technology intensities and more liberalized FDI policies. The moderating roles of munificence and dynamism are not significant in IJVs with conventional local partners and foreign partners with Chinese cultural background.

Money Talks, Banks are Talking: Dakota Access Pipeline Finance Aftermath

Author(s): Cook, Michelle; MacMillan, Hugh | Abstract: This Article provides a Dakota Access Pipeline (DAPL) finance and divestment campaign retrospective. The Article explains: 1) how DAPL was financed, highlighting the dynamic in which banks take fees for the privilege of financing and refinancing pipeline debt; and 2) how joint venture ownership structures and corporate finance arrangements buffered against efforts to hold DAPL banks accountable. At the same time, many of the same banks finance gun industry and prison industry growth, alongside increased police militarization. Although, intersectional visibility of these financial ties is a start, victims of the financial industry lack enforceable corporate accountability mechanisms for seeking redress. DAPL banks managed to deflect divestment pressure and avoid meaningful remedial actions. These observations point to the need for systemic changes in corporate accountability mechanisms but also to reclaim and reimagine a world outside of capital, of future self-determined indigenous economic structures, new visions and practices of complementary currencies, and other banking alternatives.

Overspecified vessel design solutions in multi-stakeholder design problems

Engineering design is characterized, in many cases, by the involvement of multiple stakeholders. The variety of stakeholders’ expectations with regards to the output and outcome of a vessel design situation, and the differences in background, culture and information asymmetry among stakeholders, make it difficult to arrive at a common set of requirements and a mutually accepted vessel design solution. In this paper, we show how poor handling of expectations in multi-stakeholder arrangements may lead to overspecified design solutions and thereby, negatively affect business outcomes. We propose and test a set of metrics to measure the level of misalignment among stakeholders’ expectations to identify and measure overspecification in vessel design alternatives. The measure can be used in tradeoff analysis against cost, in the decision process for selection among design alternatives. Hence, at equal cost, a higher degree expectation fulfillment may be preferred and selected. A case study is presented for the design of an offshore ship design based on a joint-venture ownership.

Dialysis-Facility Joint-Venture Ownership: Hidden Conflicts of Interest

Opinion article. The two largest U.S. dialysis companies, DaVita and Fresenius Medical Care, control 70% of the U.S. dialysis market and each reported an annual net income of $1 billion. Joint ventures between nephrologists and dialysis companies may lead to financial incentives for participating nephrologists, which may inappropriately influence decisions about patient care. A “striking lack of transparency” regarding joint venture arrangements currently exists. Patients cannot find out whether nephrologists referring them to a dialysis facility have financial incentives to do so. There must be greater transparency and public availability of information about these practices.

Foreign Subsidiary Performance: Evidence from Ghana

The objective of this study is to examine the influence of selected ownership, location, and internalization-specific factors on performance of foreign subsidiaries in Ghana. Our analysis was based on 75 manufacturing investments made by MNEs from different countries in 1994–2008. The results indicated that market size, host country experience, greenfield establishment mode, and joint venture ownership mode had positively impacted performance of foreign subsidiaries independent of the measure of performance. Furthermore, international experience and cultural distance had influenced performance when the total performance measure was used. Finally, the ownership mode significantly influenced performance only in greenfield investments, and not in acquisition mode.

Joint Ventures and Involvement of Parent Firms: The Case of Japan

This paper focuses on the investment methods parent companies use to form joint ventures (JVs) and investigates the relationship between those investment methods and JV stability. This study finds that factors such as parents' percentage ownership of JVs and their duration of ownership in JVs vary with investment method. This study also finds that JV terminations differ with investment methods. This suggests that investment methods affect JV stability. Third, the study finds that when one parent contributes financial capital and another parent contributes assets to a JV in the same industry, the parent that contributes the financial capital is more likely to acquire the JV later. In addition, parent companies owning more than 50% of their JVs tend to acquire 100% of those JVs regardless of investment method.

Do Strategic Alliances and Joint Ventures Create Value for Bondholders and Shareholders?

This paper investigates whether joint ventures and strategy alliances create value for bondholders and stockholders by examining the wealth effects around the announcements of alliance events. Based on 3,243 alliance announcements from 1984 to 2011, we find that alliances create value for bondholders and stockholders. In a 2-month window, the mean abnormal return is 0.67% for bondholders and 1.06% for stockholders. We explore various explanations for the wealth effects. Joint ventures create value to bondholders through financial synergy and to shareholders through operating synergy. In addition, alleviation of financial constraints hypothesis holds for shareholder reaction, but does not help explain bondholder wealth effect. Moreover, uncertainty about profitability in the alliance industry has a positive and significant effect on bondholder and stockholder value. For strategic alliances, both financial and operating synergy effects contribute to bondholder wealth. Uncertainty about product market is significant for shareholder wealth. Finally, horizontal or domestic collaboration in strategic alliances generates larger stock returns, while equal ownership in joint ventures leads to lower bondholder and stockholder returns.

Equity ownership and control of international joint ventures in the retail sector

International joint ventures (JVs) are a critical entry mode for international retailers. As a result of limited research on JVs in retailing, many significant formation decisions have not been addressed. Among the most important of these decisions is the ownership structure arrangement. This study investigated the determinants of JV equity ownership with seven British multinationals. The study found that JV equity ownership is often simultaneously influenced by multiple stimuli (or determinants) within organisational, partner and host-market domains. Equal ownership in JVs is partly determined by resource gaps, experience and managerial perceptions of partner trust and commitment during negotiations. Equity is only one source of control in retailing JVs. Some retailers prefer majority equity to influence the JV's strategy/policy context and confer legal voting rights at decision-making deadlock. The same retailers do not wish to dominate the JV. Other retailers are highly sceptical of equity to exert control and influence in retail JV operations. The study concludes with managerial implications and future research directions.

Optimal ownership in joint ventures with contributions of asymmetric partners

This paper faces two questions concerning Joint Ventures (JV) agreements. First, we study how the partners contribution affect the creation and the profit sharing of a JV when partners' effort is not observable. Then, we see whether such agreements are easier to enforce when the decision on JV profit sharing among partners is either delegated to the independent JV management (Management Sharing) or jointly taken by partners (Coordinated Sharing). We find that the firm whose effort has a higher impact on the JV's profits should have a larger profit shares. Moreover, a Management sharing ensures, at least in some cases, a wider range of self-enforceable JV agreements.

Optimal Ownership in Joint Ventures with Contributions of Asymmetric Partners

This paper faces two questions concerning Joint Ventures (JV) agreements. First, we study how the partners contribution affect the creation and the profit sharing of a JV when partners' effort is not observable. Then, we see whether such agreements are easier to enforce when the decision on JV profit sharing among partners is either delegated to the independent JV management (Management Sharing) or jointly taken by partners (Coordinated Sharing). We find that the firm whose effort has a higher impact on the JV's profits should have a larger profit shares. Moreover, a Management sharing ensures, at least in some cases, a wider range of self-enforceable JV agreements.

Influences on foreign ownership level and entry mode choice in Vietnam

This study examines the determinants of (1) ownership level in equity joint ventures and (2) foreign market entry mode choice in the context of Vietnam. The first part is a replication of [Pan, Y. (1996). Influences on foreign equity ownership level in joint ventures in China. Journal of International Business Studies, 27, 1–26] study of foreign ownership level in equity joint ventures in China. Though Vietnam and China share some common characteristics, most of Pan's findings are not generalizable to Vietnam. The second part indicates that advertising intensity, country risk of Vietnam, project investment amount, project duration, cultural distance, competitive intensity, and location of investment have significant impacts on entry mode choice. An integrated analysis of joint venture ownership level and entry mode choice based on percentage of foreign equity suggests that only some of the above factors have statistically significant effects.

Environmental Risk and Foreign Equity Ownership in Joint Ventures in China

ABSTRACT Environmental risk in a host country is a key issue that foreign firms must deal with when deciding how much equity ownership to acquire and how much control to have in an equity joint venture (EJV) in that country. This study examines the relationship between changes in the risk situations in China and the level of foreign equity ownership in the EJV. It hypothesizes that Japanese partners would be more likely than U.S. or Hong Kong partners to acquire a 50% or higher level of equity ownership. This tendency would become more pronounced when the risk conditions in China deteriorate. The empirical results, based on 3,838 EJVs in China that had foreign partners from U.S., Japan, Hong Kong and Europe during the 1979–1992 period, are largely consistent with the hypotheses.

Influences on Foreign Equity Ownership Level in Joint Ventures in China

This study examines the determinants of foreign equity ownership in joint ventures in China. Drawing upon Duning's ownership, locational and internalization paradigm and the literature on bargaining power, eleven variables that impact foreign ownership preferences and concessions are examined. These variables are advertising intensity, foreign capital input, country risk of China, EJV investment amount, EJV contractual duration, cultural distance, competitive intensity, local partner state ownership, local partner alignment, foreign partner alignment, and EJV location. The empirical findings are largely consistent with the hypotheses. The empirical findings are largely consistent with the hypotheses. Further, interesting differences were found among U.S., European and Japanese firms with respect to the impact of these determinants.

On the determinants of foreign ownership shares: Evidence from US firms' joint ventures in Japan

AbstractIt is often argued that firms' foreign expansion is motivated by economies of scale in information‐based intangible assets. Since these assets are combined with local factors in real production, their owner often has to deal with local factor owners' opportunistic behavior such as siphoning of skills which reduces the return on intangibles to the original owner. Local factor owners' agency behavior can also reduce a subsidiary's profit. Maintaining ownership mitigates the former type of opportunistic behavior, while ceding ownership reduces the latter type. Hence there is a non‐linear relationship between ownership and the cost of control. In this paper we present a model that incorporates these aspects of a joint venture ownership. In our model the share in a joint venture of a foreign parent firm with a superior technology is determined such that its marginal cost of control is set equal to the marginal benefit it derives from a joint venture. We assume that, because of the uniqueness and mobility of its intangible factor, the foreign partner has more bargaining power than its local counterpart regarding the ownership of their joint venture and that the local partner is less concerned than its foreign counterpart about the problems of agency and property rights protection because of its geographic and cultural proximity to the joint venture. As a consequence, the foreign partner is able to exert its preference for its ownership share in the joint venture. Our theoretical results allow a decomposition of ownership share into components explained by the cost of control and by the profitability of a joint venture. Our empirical results using data on technology‐based US firms' subsidiaries in Japan are consistent with our model predictions. In particular, the fraction of ownership share explained by the cost of control relative to the fraction explained by intrinsic profitability is higher for industries that rely more heavily on intangible assets, as expected from the model.

Physician ownership of physical therapy services. Effects on charges, utilization, profits, and service characteristics

<h3>Objective.</h3> —To evaluate the effects of physician ownership of freestanding physical therapy and rehabilitation facilities on utilization, charges, profits, and three measures of service characteristics for physical therapy treatments. <h3>Design.</h3> —Statistical comparison by physician joint venture ownership status of freestanding physical therapy and comprehensive rehabilitation facilities providing physical therapy treatments in Florida. <h3>Participants.</h3> —A total of 118 outpatient physical therapy facilities and 63 outpatient comprehensive rehabilitation facilities providing services in Florida during 1989. The data from the facilities were collected under a legislative mandate. Main Outcome Measures.—Visits per patient, average revenue per patient, percent operating income, percent markup, profits per patient, licensed therapist time per visit, and licensed and nonlicensed medical worker time per visit. <h3>Results.</h3> —Visits per patient were 39% to 45% higher in joint venture facilities. Both gross and net revenue per patient were 30% to 40% higher in facilities owned by referring physicians. Percent operating income and percent markup were significantly higher in joint venture physical therapy and rehabilitation facilities. Licensed physical therapists and licensed therapist assistants employed in non-joint venture facilities spend about 60% more time per visit treating physical therapy patients than licensed therapists and licensed therapist assistants working in joint venture facilities. Joint ventures also generate more of their revenues from patients with well-paying insurance. <h3>Conclusion.</h3> —Our results indicate that utilization, charges per patient, and profits are higher when physical therapy and rehabilitation facilities are owned by referring physicians. With respect to service characteristics, joint venture firms employ proportionately fewer licensed therapists and licensed therapist assistants to perform physical therapy, so that licensed professionals employed in joint venture businesses spend significantly less time per visit treating patients. These results should be of interest to the medical profession, third-party payers, and policymakers, all of whom are concerned about the consequences of physician self-referral arrangements. (<i>JAMA</i>. 1992;268:2055-2059)

Physician Ownership of Physical Therapy Services

To evaluate the effects of physician ownership of freestanding physical therapy and rehabilitation facilities on utilization, charges, profits, and three measures of service characteristics for physical therapy treatments. Statistical comparison by physician joint venture ownership status of freestanding physical therapy and comprehensive rehabilitation facilities providing physical therapy treatments in Florida. A total of 118 outpatient physical therapy facilities and 63 outpatient comprehensive rehabilitation facilities providing services in Florida during 1989. The data from the facilities were collected under a legislative mandate. Visits per patient, average revenue per patient, percent operating income, percent markup, profits per patient, licensed therapist time per visit, and licensed and nonlicensed medical worker time per visit. Visits per patient were 39% to 45% higher in joint venture facilities. Both gross and net revenue per patient were 30% to 40% higher in facilities owned by referring physicians. Percent operating income and percent markup were significantly higher in joint venture physical therapy and rehabilitation facilities. Licensed physical therapists and licensed therapist assistants employed in non-joint venture facilities spend about 60% more time per visit treating physical therapy patients than licensed therapists and licensed therapist assistants working in joint venture facilities. Joint ventures also generate more of their revenues from patients with well-paying insurance. Our results indicate that utilization, charges per patient, and profits are higher when physical therapy and rehabilitation facilities are owned by referring physicians. With respect to service characteristics, joint venture firms employ proportionately fewer licensed therapists and licensed therapist assistants to perform physical therapy, so that licensed professionals employed in joint venture businesses spend significantly less time per visit treating patients. These results should be of interest to the medical profession, third-party payers, and policymakers, all of whom are concerned about the consequences of physician self-referral arrangements.