Explaining equity shares in international joint ventures: Combining the influence of asset characteristics, culture and institutional differences

Michael Bowe, Sougand Golesorkhi and Mo Yamin

Research in International Business and Finance, 2014, vol. 31, issue C, 212-233

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.

Keywords: International joint ventures; Culture; Institutional differences; Monitoring costs; Equity shares; Collateral (search for similar items in EconPapers)
JEL-codes: D23 D86 G32 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:31:y:2014:i:c:p:212-233

DOI: 10.1016/j.ribaf.2013.06.008

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