Joint venture ownership changes and parent firm performance
Abstract
Joint ventures (JVs) and other alliances have become increasingly common instruments of firms' international and corporate strategies during the 1980s and 1990s. These hybrid organizational forms are also unstable, short-lived, and complex to manage. An expansive yet fragmented body of research has uncovered JV formation patterns in the U.S. and abroad as well as firms' JV formation motives. Considerably less is known about post-formation life-cycle stages, including how ventures evolve and the implications for parent firms. This dissertation examines factors influencing the means by which ventures terminate and the parent firm performance effects of JV termination. A taxonomy is developed to distinguish nine types of JV instability based on firms' unique ownership changes. A corporate strategy perspective on JV instability critically examines the common assumption that JV longevity is in parent firms' best interests while JV termination is indicative of collaborative failure. Several conditions are identified under which JV termination rather than JV continuance may be optimal for parent firms. Empirical analysis of several hundred domestic and international JVs provides support for a more constructive, contingency view of JV termination. An event study shows JV termination often adversely affects parent firms, yet JV termination can also enhance firm value in well-defined contexts. JV termination modes and the performance implications of JV termination reflect governance, strategic, and environmental contingencies identified by transaction cost economics (TCE) and strategic management. The empirical evidence emphasizes the advantages of differentiating JV instability types in theoretical and empirical JV research, extending selection-based theories to directly examine firms' post-entry decisions and performance outcomes, and linking previously disconnected streams of alliance research. For firms managing collaborative strategies, the study's implications complement the normative alliance literature emphasizing the need for venture longevity and stability. While long-lived JVs may serve parent firms well in many contexts, JV continuance may also involve significant opportunity costs. The analysis identifies specific conditions under which different types of JV termination can enhance or destroy firm value. The findings also highlight important tradeoffs firms can face when managing JV evolution or planning for the termination of domestic and international ventures.
Degree
Ph.D.
Advisors
Miller, Purdue University.
Subject Area
Management|Business costs
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