Post-Formation Inter-Partner Equity Transfers in International Joint Ventures: The Role of Experience

Under what conditions is an IJV partner likely to acquire its counterpart's equity stake upon a market cue of more opportunities; or sell its own equity stake to the counterpart upon a market cue of fewer opportunities? The puzzle springs from the premise that, upon a market cue, both the MNE p...

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Bibliographic Details
Published in:Global strategy journal 2014-11, Vol.4 (4), p.331-348
Main Authors: Iriyama, Akie, Madhavan, Ravi
Format: Article
Language:English
Subjects:
Equity
experience
Globalization
international joint venture
Joint ventures
market cue
ownership equity acquisition
ownership equity divestment
Partnerships
real options
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Summary:Under what conditions is an IJV partner likely to acquire its counterpart's equity stake upon a market cue of more opportunities; or sell its own equity stake to the counterpart upon a market cue of fewer opportunities? The puzzle springs from the premise that, upon a market cue, both the MNE partner and the local IJV partner are motivated to appropriate value in a manner consistent with the direction of the market cue. However, only one partner can change the ownership share in its favor. Building on the real options logic and the experiential learning perspective, we suggest that the local partner is more likely to realign ownership share in its own favor, all else equal. However, an MNE's cumulative operational experience overturns this. Our model is supported by data on Japanese automotive supplier IJV equity changes over an 18‐year period.
ISSN:2042-5791
2042-5805
DOI:10.1002/gsj.1086