Inter-partner Credible Threat in International Joint Ventures: An Infinitely Repeated Prisoner's Dilemma Model

Yan Zhang and Nandini Rajagopalan
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Yan Zhang: Rice University
Nandini Rajagopalan: University of Southern California

Journal of International Business Studies, 2002, vol. 33, issue 3, 457-478

Abstract: We use an infinitely repeated prisoner's dilemma model to examine the role of inter-partner credible threat in international joint ventures (IJVs). Inter-partner credible threat refers to the certainty of either partner's retaliation given the other partner's earlier cheating. We argue that inter-partner credible threat represents the first order determinant and partners' management control represents the second order determinant of partner payoffs. When inter-partner credible threat is present, both partners achieve balanced payoffs whereas when it is absent, partners' relative control will determine their relative payoffs. In-depth interview data from four IJVs in China provide preliminary support for our theoretical arguments.© 2002 JIBS. Journal of International Business Studies (2002) 33, 457–478

Date: 2002
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