Explaining equity shares in international joint ventures: Combining the influence of asset characteristics,culture and institutional differences |
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| Institution: | 1. Manchester Business School, University of Manchester, Manchester M15 6PB, UK;2. Manchester Metropolitan University Business School, Manchester M15 6BH, UK;1. Department of Accounting and Finance, Technological Educational Institute of Peloponnese, Kalamata, Greece;2. Department of Banking and Financial Management, University of Piraeus, Greece;1. Trinity University, School of Business, Department of Business Administration, One Trinity Place, San Antonio, TX 78212-7200, USA;2. University of Texas at San Antonio, College of Business, Department of Management Science and Statistics, One UTSA Circle, San Antonio, TX 78249, USA;3. School of Economics and Management, Tongji University, Shanghai, PR China;4. Institute of Policy and Management, Chinese Academy of Science, Beijing, PR China;1. Indian School of Business, India;2. UTS Business School, University of Technology Sydney, Australia;3. Rawls College of Business, Texas Tech University, United States |
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| Abstract: | This paper investigates the determinants of the observed contracted equity share ownership structure in international joint ventures (IJVs). We propose that the inherent intangibility of the assets that partner's contribute to the IJV, and both formal (legal) and informal (cultural) institutional differences between partners contribute to explaining the negotiated division of the IJV's equity share. Empirical results from 442 UK-based home-foreign IJVs, indicate that an IJV partner's equity share ownership is positively correlated with the intangibility of the assets they contribute to the IJV relative to those of the second partner. Both cultural and formal institutional differences exert a moderating influence on the observed asset intangibility-equity share relationship for the foreign IJV partner. We attribute this finding to both risk perceptions and the liability of foreignness. |
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| Keywords: | International joint ventures Culture Institutional differences Monitoring costs Equity shares Collateral |
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