Joint venture instability and monitoringIndian Growth and Development Review, 2009, vol. 2, issue 2, pages 126-140 Abstract: Purpose – The purpose of this paper is to build a theory of joint venture formation and instability based on synergy and monitoring. Design/methodology/approach – This problem is formulated as a dynamic game and solved using the notion of subgame perfect Nash equilibrium. Findings – It was found that monitoring problems may prevent the joint venture from forming at all. Moreover, joint venture formation usually involves over-monitoring, and ex post could involve cheating by one, or both the firms. Faced with the possibility of over-monitoring, firms may choose to under-invest in improving the input quality. The paper develops some testable implications of this theory. Originality/value – The contribution of this paper is both methodological, as well as in terms of generation of new insight. It provides a framework that allows one to analyze issues like both sided moral hazard, as well as monitoring in joint ventures. New insights are that monitoring issues can take several forms including over- and under-monitoring by partner firms, and, there is a linkage between such monitoring problems and joint venture instability. Keywords: Joint ventures; Performance monitoring; Venture capital (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: http://EconPapers.repec.org/RePEc:eme:igdrpp:v:2:y:2009:i:2:p:126-140 Ordering information: This journal article can be ordered from Access Statistics for this article Indian Growth and Development Review is edited by Professor Satya P Das and Professor Chetan Ghate More articles in Indian Growth and Development Review from Emerald Group Publishing |
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