Asymmetric information and joint venture performance: theory and evidence for domestic and international joint ventures

Reuer, Jeffrey J.; Koza, Mitchell P.

doi:10.1002/(sici)1097-0266(200001)21:1<81::aid-smj62>3.0.co;2-r

Cited by 221 publications

(163 citation statements)

References 29 publications

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“…Differences in national culture, customer preferences, business practices, and institutional forces increase transaction costs when conducting investment abroad [12,19,20]. Furthermore, information asymmetry in foreign markets requires great efforts from executives to adjust to local market conditions, posting significant challenges in achieving strategic objectives [21,22]. Empirical studies demonstrate consistent evidence about the greater challenges in foreign investments, where foreign acquirers tend to pay more acquisition premiums [23] and suffer a higher failure rate [24], and in general, overseas investments receive much lower gains than their domestic equivalents [16,25].…”

Section: Challenges Of Fdismentioning

confidence: 99%

“…However, unlike ACs that brings the acquired entity into the acquirer's existing governance system, JVs require extensive coordination efforts from the investing firms, because their shared management requires time-consuming coordination of joint activities between the partners [29]. The coordination challenges found in JVs is likely to be magnified in an international setting, because partners may have to strive even harder to achieve consensus due of dissimilar cultural and institutional backgrounds [22,30,31]. Summing up the above discussion, a pool of related experience within the focal entry mode may enable directors to develop relevant skills to apply on the focal FDI, whereas non-focal entry mode experience may generate little value.…”

Section: Specific Learning From Director Fdi Experience Within Focal mentioning

confidence: 99%

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Does Board Experience Matter? Evidence from Foreign Direct Investment

Lai¹,

Chen²

2012

JSSM

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This study contributes to the growing literatures on the importance of board expertise to their provision of counsel for management. By demonstrating that when announcing overseas investments, how a firm alleviates its liabilities of foreignness by board members possessing relevant experiences, the present work addresses the long-standing issue of what renders board the most effective. Drawing on expertise literature, we exam the efficacy of both director specific and heterogeneous experience, assessed by foreign market entry mode and targeted host country. The empirical results yield support for favorable impacts of both types of director experience. This finding corroborates the transition of board's role from "passively" ratifying executive proposals, as predicted by agency theory, to "actively" instructing executives, as argued by resource dependence theory. The resource provision function of a board is further supported by greater benefits of director experience in situations of limited firm resources, assessed by executives' associated experience. Finally, we find that directors who have operated independently from the CEO but without relevant experience cannot have significant influence on investment outcome. Our research result contributes to corporate governance research predominated by agency theory for the past decades, which presumes director independence as the foremost prerequisite for board effectiveness.

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Section: Challenges Of Fdismentioning

confidence: 99%

Section: Specific Learning From Director Fdi Experience Within Focal mentioning

confidence: 99%

Does Board Experience Matter? Evidence from Foreign Direct Investment

Lai¹,

Chen²

2012

JSSM

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“…Another important indicator for endogenous uncertainty is the existence of prior cooperation between the partners. Prior cooperation can be used to overcome information asymmetry among partners (Reuer and Koza, 2000;Vanhaverbeke et al, 2002;Williamson, 1985). Information asymmetry occurs when firms do not have access to all the relevant information to make an investment decision.…”

Section: Prior Cooperationmentioning

confidence: 99%

External technology sourcing: The effect of uncertainty on governance mode choice

Vrande¹,

Vanhaverbeke

Duysters

2009

Journal of Business Venturing

150

104

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External knowledge sourcing is increasingly important for corporate entrepreneurship. In this study, we examine the effect of external and relational uncertainty on the governance choice for inter-organizational technology sourcing. We develop a number of hypotheses about the impact of environmental turbulence, technological newness, technological distance and prior cooperation on the choice between different governance modes. Data about external technology sourcing transactions in the pharmaceutical industry do not provide evidence for a continuum from less to more integrated sourcing modes. However, we find that the ranking depends on the type of uncertainty, indicating that firms tackle different types of uncertainty with different governance modes.

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“…Reddy, 1997 as well as Reuer and Koza, 2000). Besides, firms often seek to acquire very specific pieces of knowledge that can be accessed in a flexible and efficient way through co-operative agreements (see e.g.…”

Section: I-advantagesmentioning

confidence: 99%

“…If a firm seeks to access knowledge residing in a foreign firm by means of M&A activities it may also has 17 to buy undesired assets and capabilities not suited to its objectives; moreover, it is difficult to extract knowledge from the target firm's R&D activities as these are embedded in a unique company culture. Hence, acquiring complementary knowledge through M&A can be very costly (for these arguments see Hennart andReddy, 1997 as well as Reuer and Koza, 2000). Besides, firms often seek to acquire very specific pieces of knowledge that can be accessed in a flexible and efficient way through co-operative agreements (see e.g.…”

mentioning

confidence: 99%

Determinants of Equity-Based and Co-Operative Foreign R&D and Impact on the Parent Firm’s Performance

Berger

Hollenstein

2012

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The paper complements entry mode research by dealing with the choice of alternative modes of governance in the specific case of foreign R&D and its impact on a parent firm's performance. Firstly, we identify the factors that determine whether a firm locates abroad any R&D activities, and, if it does so, whether it chooses an equity-based rather than a non-equity co-operative mode of governance. The OLI paradigm is used as theoretical background of this analysis. Secondly, we determine the impact of foreign R&D on a parent firm's performance in terms of innovation output and labour productivity, and investigate whether this effect differs among firms using the one or the other governance mode. The study is based on separate estimations for Switzerland and Austria using comparable firm data and model specifications. The two countries are interesting cases as they strongly differ in terms of level and pattern of internationalisation. Terms of use: Documents in EconStor may JEL AbstractThe paper complements entry mode research by dealing with the choice of alternative modes of governance in the specific case of foreign R&D and its impact on a parent firm's performance. Firstly, we identify the factors that determine whether a firm locates abroad any R&D activities, and, if it does so, whether it chooses an equity-based rather than a non-equity co-operative mode of governance. The OLI paradigm is used as theoretical background of this analysis. Secondly, we determine the impact of foreign R&D on a parent firm's performance in terms of innovation output and labour productivity, and investigate whether this effect differs among firms using the one or the other governance mode. The study is based on separate estimations for Switzerland and Austria using comparable firm data and model specifications. The two countries are interesting cases as they strongly differ in terms of level and pattern of internationalisation.Keywords: Internationalisation of R&D; Governance of foreign R&D; International R&D cooperation; Foreign R&D and performance; OLI paradigm and R&D IntroductionOver the last twenty years internationalisation of R&D strongly increased and its pattern changed quite considerably (OECD, 2008). Several studies highlighted that R&D investments at foreign locations are motivated not only by traditional market and cost considerations but, more and more, by the intention to gain access to specific knowledge not available at home (see, among many others, Cantwe...

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Asymmetric information and joint venture performance: theory and evidence for domestic and international joint ventures

Cited by 221 publications

References 29 publications

Does Board Experience Matter? Evidence from Foreign Direct Investment

Does Board Experience Matter? Evidence from Foreign Direct Investment

External technology sourcing: The effect of uncertainty on governance mode choice

Determinants of Equity-Based and Co-Operative Foreign R&D and Impact on the Parent Firm’s Performance

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