Effect of equity ownership on the survival of international joint ventures

Charles Dhanaraj and Paul W. Beamish

Strategic Management Journal, 2004, vol. 25, issue 3, 295-305

Abstract: This note extends transaction cost analysis of international joint ventures (IJVs) to include explicitly the effect of equity. It challenges the common practice of treating all foreign investments with between 5 percent and 95 percent equity as IJVs. A fine‐grained analysis of the role of foreign equity ownership on the survival of 12,984 overseas subsidiaries confirms a declining, nonlinear, and asymmetrical relationship between equity and mortality in overseas subsidiaries. While investments involving small ownership levels ( 80%) have mortality rates comparable to that of wholly owned subsidiaries. Implications for research, practice, and policy are discussed. Copyright © 2003 John Wiley & Sons, Ltd.

Date: 2004
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