When the fog dissipates: The choice between value creation and value appropriation in a partner as a function of information asymmetry

Todd Morgan, Sergey Anokhin and Joakim Wincent

Journal of Business Research, 2018, vol. 88, issue C, 498-504

Abstract: This paper investigates preferences for strategic emphasis in large corporation–small firm relationships and explores how information asymmetry may moderate these preferences. Our findings suggest that information asymmetry plays a crucial role in the development of an equity partnership between large public corporations and small, privately owned, growth-oriented firms. We study 233 instances of equity partnering between large corporations and small firms to investigate the contingency effect of information asymmetry on small firms' choice of equity partner. Our results indicate that when information asymmetry between the partners is low, small firms choose partners with a strategic emphasis on value creation. Conversely, when information asymmetry is high, small firms tend to choose corporate partners that emphasize value appropriation. This finding suggests that information asymmetry makes small firms wary of entering into equity partnerships and makes them unwilling to partner with corporations that potentially have the most to offer in terms of technological expertise.

Keywords: Information asymmetry; Strategic emphasis; Equity partnerships; Value creation; Value appropriation (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:88:y:2018:i:c:p:498-504

DOI: 10.1016/j.jbusres.2017.11.032

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