The nature of partnering experience and the gains from alliances

We examine the conditions under which the prior partnering experience of firms contributes to value creation in their new alliances. We propose that prior experience with the same partners, that is, ‘partner‐specific experience,’ provides greater benefits than ‘general partnering experience’ that encompasses all prior alliances with any partner. We further explore some of the boundary conditions for the effects of partner‐specific experience. We suggest that the effect of partner‐specific experience on value creation in alliances is moderated by the extent to which the assets of the new partner differ from those of the firm's prior partners. We also propose that the firm's own technological and financial resources increase the benefits of partner‐specific experience. Finally, we predict that the value of partner‐specific experience will increase under high levels of firm‐specific uncertainty. We test these hypotheses with comprehensive longitudinal multi‐industry data on joint ventures formed among Fortune 300 firms between 1987 and 1996. Based on stock market returns to joint venture announcements, the results provide support for the contingent value of partnering experience. The implications for managing alliances and advancing organizational learning are discussed. Copyright © 2009 John Wiley & Sons, Ltd.     

Do multiple parents help or hinder international joint venture performance? The mediating roles of contract completeness and partner cooperation

We develop a mediation model in which the number of partners in a joint venture affects venture performance through contract completeness and partner cooperation. In a sample of 224 international joint ventures, we find that the number of partners is negatively related to venture contract completeness and partner cooperation, both of which are positively related to joint venture performance. The number of partners is inversely related to joint venture performance and the relationship is mediated by contract completeness and partner cooperation. We discuss theoretical and managerial implications for joint venture research and practice. Copyright © 2007 John Wiley & Sons, Ltd.     

Resource Combination and Security Price Reactions: The Case of Real Estate Joint Ventures

Joint ventures are a commonplace occurrence in the U.S. economy. In particular, firms undertaking real estate projects frequently use the joint venture as a method of combining resources. This paper examines security price reactions around real estate joint venture announcements. The evidence indicates that significant increases in the values of the participating firms occur within a two-day announcement period. The changes in values appear to be due principally to the amount of information about the local real estate market possessed by the participating firms, and an information signal about the potential financial viability of the proposed project conveyed by the presence of anchor tenants. While the results are important in their own right, they are also significant in another respect. They seem to confirm the efficiency with which the capital market processes information about the markets for trading real estate claims.     

‘Trojan horse’ or ‘Workhorse’? the evolution of U.S.–Japanese joint ventures in the United States

Foreign investors and their domestic joint venture partners must find ways to share the benefits of the venture if both sides are to be satisfied. Some work in the literature on joint ventures has asserted that there is a danger in all joint ventures, and especially joint ventures with Japanese, that one side will exploit the venture for its own gain, using it as a Trojan Horse. To test this assertion, we build a full data set of Japanese firms with joint ventures in the United States and track the ventures over time. Our data show that the Japanese partners do not take actions consistent with the Trojan Horse hypothesis. Copyright © 1999 John Wiley & Sons, Ltd.     

The Exogamic Nature of Sino-Foreign Joint Ventures

The paper suggests that Sino-foreign joint ventures areexogamicpartnerships. Three hypotheses were formulated: (1) partners pool differentiated sets of idiosyncratic and non-substitutable resources into their joint ventures; (2) they establish cooperation to gain access to resources provided by their counterparts; (3) the younger the partnership, the less the partners contribute with idiosyncratic resources. A questionnaire investigation was conducted into 67 Sino-foreign joint ventures. The test for H1 clearly demonstrated that each partner pools very different resources into the joint venture. H2 was also clearly supported by the data collected. However, H3 was weakly supported.     

The Role of Managerial Stock Option Programs in Governance: Evidence from REIT Stock Repurchases

This article examines the role of stock option programs and executive holdings of stock options in real estate investment trust (REIT) governance. We study the issue by analyzing how the market reaction to a stock repurchase announcement varies as a function of the individual REIT's governance structure. In particular, we examine how executive and employee stock option holdings influence the market reaction to a firm's announcement of a stock repurchase. Using a sample of REIT repurchase announcements, we find that the market reacts more favorably to announcements by firms where executives have larger option holdings and the chief executive officer is not entrenched. Our results with respect to the roles of stock option holdings of executives and nonexecutives differ from those reported for a cross-section of non-REIT firms. While we find evidence supporting the importance of executive stock options in aligning the incentives of management and reinforcing the positive signaling associated with a repurchase announcement, we find little evidence that the market views REIT repurchases as being used primarily to fund option exercise. We attribute these findings to greater dependence by REIT investors on internal governance mechanisms (such as stock option programs) as a result of regulatory restrictions that limit external monitoring such as hostile takeovers.     

The value from acquiring and divesting a joint venture: a real options approach

This study examines the value created from acquiring and divesting a joint venture. Unlike previous research which focuses on parent firm factors, the study examines value in light of the reason behind the termination of the venture and the characteristics of the target market. Consistent with the real options view, the paper finds that ventures divested to refocus a parent firm's product market portfolio were associated with significant value creation. In contrast, ventures acquired with the objective of growth and expansion in a target market, while not associated with significant value creation, did not destroy value either. Apart from these results, the paper also finds that acquirers and divesters gained lesser value when they terminated ventures in uncertain and concentrated industries. These latter findings highlight an important caveat with regard to termination: joint ventures confer valuable flexibility which is also forgone once they are terminated. Implications are discussed. Copyright © 2005 John Wiley & Sons, Ltd.     

Acquiring knowledge by foreign partners from international joint ventures in a transition economy: learning‐by‐doing and learning myopia

This paper proposes and tests a model of how firms acquire knowledge from their international joint venturing experience. Based on survey responses from 73 Singapore and 89 Hong Kong firms with respect to their joint ventures set up in China, the results indicate that both overseeing effort and management involvement are significant channels of knowledge acquisition. The former channel is more important for firms with a great deal of operational experience in China and for parents of older joint ventures. This finding indicates that firms improve their skills of knowledge acquisition through learning‐by‐doing. Moreover, the strategic importance of the venture concerned, instead of the learning intent of the parent, is the driving force behind the allocation of resources to the two channels. This implies that firms mainly learn through managing their key joint ventures. Since a venture that provides novel and fruitful learning experience may not, and need not, be an operation of great strategic importance, this finding suggests the existence of learning myopia. Copyright © 2002 John Wiley & Sons, Ltd.     

Are joint ventures positive sum games? The relative effects of cooperative and noncooperative behavior

Are joint ventures (JVs) characterized mainly by cooperative behavior or noncooperative behavior? In this research, we address this question by examining the interrelationship between the values created for two partners when they announce a JV. We argue that, on average, if cooperative behavior and common benefits are more influential than noncooperative behavior and private benefits, there will be a positive association between the values created for the two partners. Conversely, if private benefits and noncooperative behavior are more influential, there will be a negative association as partners derive value at the expense of each other rather than by creating new opportunities through the JV. Using a sample of 344 JVs we find evidence of a positive association between the values created for the two partners after controlling for various factors. This suggests that the stock market perceives JVs to be positive sum games rather than zero sum games, and that value creation in JVs is mainly attributable to synergies rather than appropriation of resources. Our analysis also reveals other conditions under which cooperative behavior and noncooperative behavior become dominant, such as the strength of the resources of the two partners, product market competition, and JV experience. Copyright © 2010 John Wiley & Sons, Ltd.     

The assignment of call option rights between partners in international joint ventures

We examine call option rights as a contractual clause in international joint ventures (IJVs) and propose that the assignment of the call option right in an IJV is determined by certain ex ante asymmetries between the partners. Results show that between the two partners in an IJV, the firm with greater complementarity with the venture and greater prior IJV experience is more likely to hold the call option right; in addition, the firm's contractual choice on the call option right and its ownership choice on a greater initial equity stake are substitutive. Our focus on explicit call options advances the real options theory of collaborative agreements, and our results also highlight that option rights be considered an important part of alliance design. Copyright © 2013 John Wiley & Sons, Ltd.     

How do international joint ventures create shareholder value?

This study attempts to identify conditions under which announcements of international joint venture (JV) formation lead to increases in shareholder value of participating U.S. firms. It does so by combining the singular theoretical foci of previous work on the topic and specifying previously unconsidered, but conceptually important, influences on firms' expected JV performance. The study's findings indicate support for the hypothesized effect of variables in partners' task‐related, competitive, and structural context(s), but not those in these firms' partner‐related and institutional context(s). Specifically, partner–venture business relatedness, the pursuit of R&D‐oriented activity, greater equity ownership, and large firm size, all are found to have a positive impact on firms' JV‐based value creation. Although this study finds support for the performance impact of firm‐level competition, the direction of this impact is contrary to that hypothesized. No support is found for hypothesized effect of partner–partner business relatedness, previous JV experience, partners' relative firm size, (national) cultural relatedness, and JV host country political risk. Copyright © 2000 John Wiley & Sons, Ltd.     

Organizational culture and partner interaction in the management of international joint ventures in India

Different from previous research that focused on the formation phase of partnering processes in joint ventures, this study focuses on the post-formation phase and argues that partner interaction processes of communication, cooperation, and conflict resolution play a key role in the implementation and management of joint ventures. We examine how organizational culture differences (OCD) and integration acculturation strategy (IAS) affect international joint venture (IJV) performance through the mediation of partner interaction processes. We develop hypotheses and test them by survey data from 202 executives of IJVs in India. The results suggest that the interaction processes fully mediate the negative effect of OCD but partially mediate the positive effect of IAS on partners?? satisfaction with the joint venture performance. We discuss the implication of these findings for research and practice on post-formation management of IJVs.     

Agency hazards and alliance portfolios

Prior research over several decades has catalogued many positive motives underlying firms' decisions to engage in joint ventures and other forms of alliances. In this empirical analysis, we investigate whether agency problems brought about by the separation of ownership and control also stimulate the development of firms' joint venture portfolios. By focusing on joint ventures, as opposed to diversification in general or acquisitions, we address the recent debate on agency theory's domain. Results from a sample of U.S. manufacturing firms' alliance portfolios offer supporting evidence, and comparable findings are obtained for international and domestic joint ventures. Agency hazards are also found to bring about extensions of firms' nonequity alliance portfolios in both the international and domestic settings. Copyright © 2005 John Wiley & Sons, Ltd.     

ENDOGENOUS FORMATION OF COMPETITIVE RESEARCH SHARING JOINT VENTURES*

Research sharing is an important objective of many research joint ventures. When partners share R&D but do not maximize joint profits, large consortia are more profitable than small ones, and joint ventures prefer dispersed rivals. For much of the spillover space, a coalition formation game that permits limited membership predicts that at most, three joint ventures form. Research‐sharing joint ventures improve welfare when spillovers are low, and banning research sharing joint ventures is beneficial for high spillovers. With imperfect research sharing and low spillovers, allowing only research sharing is the best industry‐wide joint venture alternative for consumer surplus.     

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.     

REIT Dividend Policies and Dividend Announcement Effects During the 2008–2009 Liquidity Crisis

Real estate investment trust (REIT) dividend policies and dividend announcement effects during the 2008–2009 liquidity crisis are examined. Multinomial logit results indicate that REITs with higher market leverage or lower market‐to‐book ratios are more likely to cut dividends, suspend dividends or pay elective stock dividends. These results imply that mitigating going‐concern risk is an important motive for REITs adjusting dividend policies during the crisis and support dividend catering theory where investor demand for dividends impacts corporate dividend policies. Moreover, REITs that cut or suspend dividends experience positive cumulative abnormal returns during the post‐announcement period after controlling for the potential influence from simultaneous funds from operation announcements. The positive market response over the post‐announcement period supports the notion that dividend decisions convey information to investors and is also consistent with the broad catering theory of dividend policy.     

The impact of prior stock market reactions on risk taking in acquisitions

We study the relationship between the stock market's reaction to a prior acquisition and the risk associated with a subsequent acquisition. Using a sample of 823 acquisitions over the period 1990–2006 we find that acquirers buy increasingly volatile targets both as the abnormal dollar gains from the previous acquisition announcement increase, and as the abnormal dollar losses increase (i.e. a V shaped relationship). Our findings are consistent with psychological theories of decision making and risk seeking, including prospect theory and the house money effect. In addition, they highlight that the stock market reaction to the prior acquisition announcement acts as an important reference point in acquisition decisions. Copyright © 2014 John Wiley & Sons, Ltd.     

Effects of alliances,time, and network cohesion on the initiation of foreign sales by new ventures

In this study, we seek to advance the network perspective on new venture internationalization by examining the role of networks in accelerating new venture sales into foreign markets. We propose that knowledge derived from ventures' technology and marketing alliances increases the likelihood that new ventures begin exploiting opportunities in international markets. We also argue that the extent to which the networks open the venture to new knowledge or constrain it to knowledge already shared among the partners will influence the initiation of foreign sales by a venture. Using a longitudinal dataset of 118 ventures in the U.S. biotechnology industry, we confirm that different types of alliances (and, therefore, different types of knowledge—technology and marketing knowledge) differentially impact the likelihood of new venture internationalization. Moreover, network cohesion among venture alliances increases the likelihood that marketing alliances will promote initial foreign market sales, but decreases the likelihood that technology alliances will do so. Our research is a timely response to a call for the study of interactive effects among network structure, complex tasks, and time, and it provides a possible explanation for certain unexpected findings in studies that did not consider the effects of time. Copyright © 2010 John Wiley & Sons, Ltd.     

The role of managers' political networking and functional experience in new venture performance: Evidence from China's transition economy

Drawing upon the resource‐based view and transaction cost economics, this study aims to examine how various types of managerial resources (i.e., political networking and functional experience) can be beneficial to new ventures in a transition economy. Using survey data from a sample of new ventures in China's high‐technology industries, we demonstrate that managers' political networking and functional experience are positively related to new venture performance. We also find that the positive relationship between functional experience and new venture performance is moderated by the type of ownership of the ventures and the level of dysfunctional competition in their environments. Theoretical and managerial implications are discussed. Copyright © 2007 John Wiley & Sons, Ltd.     

Are joint venture partners more opportunistic in a more volatile environment?

This study examines how joint venture partners' opportunism is influenced by environmental volatility in a drastically changing emerging economy. Building on transaction cost and information‐processing theories, we develop the hypothesis that opportunism increases to cope with industry structural instability, information unverifiability, and law unenforceability, the three interrelated yet distinct characteristics that jointly describe environmental volatility in an emerging economy. Our analysis of 188 foreign joint ventures in an emerging market suggests that opportunism increases with information unverifiability and law unenforceability. These relationships are even stronger when joint ventures depend more on the host country environment, but weaker when joint ventures operate in faster‐growing industries. Finally, opportunism is found to play a mediating role in the relationship between environmental volatility and joint venture performance. Copyright © 2007 John Wiley & Sons, Ltd.