Productivity is a key factor that differentiates firm competitiveness. To promote productivity, the internal source, research and development expenditure, is undoubtedly a primary driver, while ...various external sources are also critical. This study examines the determinants of productivity in Chinese firms, focusing on external technological sources, especially policy-induced factors, including tariff-free imported intermediates, forced technology transfer through international joint ventures (IJVs) and production subsidies. Based on firm-customs matched data for 2001-2007, we find that the technologies embodied in imported intermediates and IJVs in technology-intensive sectors positively influence productivity. Production subsidies also have a significant and positive relationship with productivity. Overall, the above findings suggest the effectiveness of policy instruments. Further heterogeneous analyses highlight the differences in productivity effects by isolating the above factors individually in various dimensions.
An increasing number of multinational firms from the developed markets (DMs) are seeking rapid expansion into emerging markets (EMs), such as India and China, through international joint ventures ...with EM firms (E-IJVs). However, nearly half of these joint ventures get terminated unexpectedly within five years of their formation. As E-IJV terminations cause disruptions to the strategy and performance of the partner firms, it is critical to understand factors leading to the termination. Building on the organizational learning perspective, we investigate the impact of DM partner’s relative control on the likelihood of E-IJV termination using a novel dataset of E-IJVs in India between 2001 and 2012. Our findings suggest that higher relative control by DM partner firms increases the likelihood of E-IJV termination. Further, we find that scope of the partnership negatively moderates this relationship, implying that the likelihood of E-IJV termination with a dominant DM partner decreases when the scope is high. We discuss the theoretical contributions and managerial implications of these results.
This study explores when wholly owned subsidiaries outperform joint ventures with local partners. In order to avoid the endogeneity problem inherent in foreign subsidiaries' operating mode decisions ...that might confound performance measurement, we employ the propensity score matching method, along with the difference-in-differences approach, and compare the performances of joint ventures turned wholly owned subsidiaries vis-à-vis continuing joint ventures. Based on foreign subsidiaries' financial data in China for 1998—2006, we find strong evidence that converted wholly owned subsidiaries outperform continuing joint ventures in industries characterized by high levels of intangible assets such as technology or brand, after controlling for factors that may affect the conversion decision. This finding is consistent with the prediction of transaction cost theory.
Previous research has underscored the significance of the equity investment relationship in facilitating knowledge transfers between a joint venture and its parent company. Successful knowledge ...bridging in joint ventures plays a crucial role in shaping organizational learning and innovation performance outcomes. The empirical evidence on the effectiveness of knowledge transfers, however, presents a mixed picture. Through a rigorous sample selection process, we collect panel data on 366 joint venture-year observations across four industries during an 18-year period to empirically test the proposed hypotheses. In this research, we contend that the ability of joint ventures to act as knowledge bridges depends on the diversity of the parent's knowledge and the technological similarity between the joint venture and the parent, especially in the context of internal knowledge development. An examination of bridging performance in the relationship between joint ventures and parent companies indicates that both parental knowledge diversity and joint venture - parent technology similarity positively impact the knowledge acquired through the joint venture - parent equity relationship. Furthermore, when the joint venture strongly depends on internal knowledge, the positive relationship among parental knowledge diversity, joint venture - parent technology similarity, and joint venture knowledge bridging becomes more pronounced. Our findings shed light on how the specific features of a parent company contribute to the knowledge learning bridged by a joint venture and underscore the role of equity investments in joint venture firms' innovation.
We developed a theoretical model that examines the impacts of a foreign parent’s disseminative capacity on knowledge transfer to International Joint Ventures (IJVs). We tested our model with data ...from 199 IJVs in South Korea. We found empirical support for our arguments that the foreign parent firm’s codification and articulation ability, willingness to share knowledge, and frequent and effective use of communication channels determined the extent of knowledge acquisition by the local IJV partners.
We study the economics of international joint ventures using administrative data for China. We first show that foreign investors choose Chinese partners that are relatively large, productive, and ...more innovative to set up their joint venture. Using a difference-in-differences framework, we then provide evidence that joint ventures lead to domestic benefits in the form of productivity and technological spillovers to both the Chinese partners in joint ventures as well as other domestic Chinese firms. Exploiting the easing of joint venture requirements as China entered the WTO in the year 2001, we further show that intraindustry spillovers from joint ventures to other domestic firms increased in the wake of China’s WTO accession, consistent with gains from foreign technology rising due to enhanced commitment through the rules-based WTO system. Our results shed new light on the efficacy of FDI performance requirements as well as on claims regarding international technology transfer that underpinned the China–US trade war.
Despite the large literature on alliance contract design, we know little about how transacting parties change and amend their underlying contracts during the execution of strategic alliances. Drawing ...on existing research in the alliance contracting literature, we develop the empirical question of how contract detail and prior ties influence the amount, direction, and type of change in such agreements during the collaboration. We generated a sample of 115 joint ventures (JVs) by distributing a survey to JV board members or top managers and found that the amount of contract change is negatively associated with the level of detail in the initial contract but is positively associated with the number of prior ties between alliance partners. In relation to the direction of contract change, we find that the level of detail of the initial agreements negatively correlates with the likelihood of removing or weakening existing provisions and that prior collaborative experience positively correlates with the likelihood of strengthening of existing provisions or adding of new ones. We also find that prior ties affect the type of change in that JV parents prefer to change enforcement provisions more so than the coordination provisions in the contract. Our paper generates new insights on the complementarities between relational governance and transaction cost economics perspectives on alliance contracting.
•We study optimal pricing for joint-venture terminals under the congestion effect.•We characterize the optimal solution under a variety of cases.•We present search methods with a search space of ...dimension one or two.•We investigate the value of accounting for the congestion effect.
The congestion effect refers to the phenomenon that more customers choosing to use the same facility reduces the facility’s utility. This work addresses the optimal pricing problem for a firm operating a joint-venture terminal under the congestion effect. The firm is formed between a port terminal operator and a shipping line, thus being able to provide a bundle of ocean transportation and port terminal solutions to cargo suppliers. The objective is to determine the optimal prices charged to cargo suppliers to maximize the total profit of the firm. First, we develop a tractable flow-based optimization model that uses a fixed-point equation to capture the interaction between the congestion effect and cargo suppliers’ choice. Second, we characterize the optimal solution for a variety of cases, including the single origin-destination case, partially homogeneous case that includes the fully homogeneous case as a special case, and heterogeneous case. Third, we evaluate the profit loss incurred by ignoring the congestion effect with numerical studies. Moreover, we propose one-variable and two-variable search methods for the partially homogeneous and heterogeneous cases, respectively. We learn that the firm should quote the same price to all cargo suppliers under the fully homogeneous case. However, this is not necessarily optimal under the partially homogeneous or heterogeneous cases. The profit loss incurred by neglecting the congestion effect can be significant and increases as cargo suppliers become less tolerant of congestion.
•Technological proximity is decisive for the private and social benefits of a RJV.•While profits always increase, innovation output often declines if firms collaborate.•Research collaborations do not ...necessarily have positive welfare implications.•A higher intensity of cooperation causes higher profits of the collaborating firms.
We study research joint ventures (RJV) in a setting where knowledge spillovers increase with the technological proximity between firms. The scenarios we investigate differ in the intensity of collaboration which depends on the (non)coordination of research activities and the extent of exchanged knowledge. Firms can form bilateral RJVs what leads to the existence of insiders (collaborating firms) as well as outsiders (non-collaborating firms) in an oligopolistic market. Our central findings are (i) RJVs do not generally outperform competitive research with respect to innovative output and social welfare; (ii) technological proximity and the intensity of collaboration play a decisive role for the private and social benefits of a RJV; (iii) joint research combined with complete knowledge sharing does not generally outperform less intensive collaboration forms.
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