Empirical studies of the shareholder valuation impact of firms’ international joint venture (IJV) participation have usually emphasized firm‐specific factors, but rarely extended…
Abstract
Empirical studies of the shareholder valuation impact of firms’ international joint venture (IJV) participation have usually emphasized firm‐specific factors, but rarely extended their analysis to location‐specific factors. This is a crucial omission because the two sets of factors are interconnected vis‐a‐vis their influence on firms’ performance. Yet, previous work has neither identified how the two sets of factors complement each other nor investigated the effect of these complementarities on the shareholder value of firms who enter into IJVs. This study attempts to fill these gaps. It develops a typology of IJVs and then performs cluster analysis on a sample of 241 equity IJVs. Results indicate eight clusters in the data, including three clusters with positive shareholder value. In deriving support for its six hypotheses, the study highlights both value‐creating and value‐neutral configurations of firm‐ and location‐specific variables.
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Pavlos Symeou and Hemant Merchant
Previous work in international business largely disregards the interplay between home-country conditions and firms’ geographical diversification – implying that, regardless of…
Abstract
Purpose
Previous work in international business largely disregards the interplay between home-country conditions and firms’ geographical diversification – implying that, regardless of indigenous conditions, firms can modify their domestic performance (which the authors measure in terms of change in firms’ domestic productivity) merely by diversifying into international markets. The authors contest this view and argue that diversification does not substitute for home-country conditions. Rather, it moderates the baseline impact of home-country conditions on indigenous firms’ domestic performance. The purpose of this study is to describe these mechanisms and empirically examine their implications for indigenous firms’ performance.
Design/methodology/approach
The authors investigate the above model based on a 20-year longitudinal analysis of 600 observations involving telecommunication incumbents from 65 countries. They control for possible reverse causality between firms’ international diversification (and other firm-specific factors) and their domestic performance, and conduct several robustness checks.
Findings
The authors find – as hypothesized – that international diversification moderates the baseline performance impact of different home-country attributes in different ways. Such diversification does not have a uniform moderating effect on home-country attributes. In other words, the baseline effects of home-country conditions are altered as indigenous firms become more internationalized.
Originality/value
Theoretically, this work bridges the micro- and macro-level arguments that interweave strands from the competitive strategy and national competitive advantage literatures. By unpacking diversification’s role vis-à-vis the effect of upstream (home-country) conditions on firm performance, the authors attempt to shed light on the mechanisms that help (or hinder) indigenous firms’ performance. Empirically, this study helps to reconcile seemingly opposite views about whether and, if so, how much home-country conditions shape indigenous firms’ expansion after they have diversified internationally.
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Hamza Aib, Jacques Liouville and Hemant Merchant
The purpose of this study is to demonstrate the effect of initial international joint ventures (IJV) structural conditions on two main equity-based instability facets: change of…
Abstract
Purpose
The purpose of this study is to demonstrate the effect of initial international joint ventures (IJV) structural conditions on two main equity-based instability facets: change of IJV ownership structure and acquisition of the IJV by one of the IJV partners. Drawing on the transaction cost theory, the authors examine three key initial structural conditions: IJV formation mode, number of partners and IJV’s ownership structure.
Design/methodology/approach
The authors apply the “Event history analysis” technique to test the hypotheses using a data set of 140 French-foreign JVs.
Findings
The findings show that the mode of an acquisitive IJV and unequal equity positions held by partners increase the likelihood of a change of IJV’s ownership structure and its eventual acquisition by one of the partners. In addition, the findings show that while an increase in the number of IJV partners is directly related to the change of IJV ownership structure, it has a statistically insignificant effect on IJV acquisition.
Originality/value
Drawing on “transaction costs” arguments, this study advances the literature by offering fine-grained results related to the effects of initial structural conditions on aspects of unintended instability in French-foreign JVs.
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This study empirically identifies three strategies for creating shareholder value for firms who venture into Emerging markets (EMs) in search of corporate growth and profitability.
Abstract
Purpose
This study empirically identifies three strategies for creating shareholder value for firms who venture into Emerging markets (EMs) in search of corporate growth and profitability.
Methodology
To uncover these value creating strategies, we apply Cluster analysis techniques, analysis of variance as well as survey several qualitative case-studies of firms who have entered EMs worldwide.
Findings
Our findings demonstrate how firms can – and do – tap into the potential that EMs offer, despite the inherent riskiness of these markets and/or constraints on corporate resources. Statistically, no single shareholder value creating strategy is more (or less) remunerative than other strategies. Many equally profitable trajectories coexist vis-à-vis corporate growth in EMs.
Research limitations/implications
Our findings are based on stock-markets’ expectations of firm performance; these expectations may not correspond to the actual future firm performance.
Practical implications
The principles we have isolated have a broad appeal because they identify variety of paths that facilitate shareholder value creation via participation in EMs. We expose the inner workings of these trajectories and illustrate particular firm-specific and location-specific combinations associated with profitable EM ventures.
Originality/value
This study seriously challenges the conventional view that value creation is a function of singular positive influences. On the contrary, this study establishes that value creation is multi-dimensional and submits that a more refined way to augment performance is to develop an ability to combine relevant firm-specific and location-specific factors so that they can, if needed, offset the impositions of each other.
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Attempts to establish a decision‐making model by which multinational enterprises (MNEs) front‐end financial target can be evaluated and determined. Explains and defines the…
Abstract
Attempts to establish a decision‐making model by which multinational enterprises (MNEs) front‐end financial target can be evaluated and determined. Explains and defines the financial range. Identifies their strategic concerns in order to do this. Continues by exploring the pattern of front‐end financial target variation and the process of its determination, constructing an international joint venture investment supply‐demand model. Elaborates upon how contingency factors in international operations exert direct impact on this matter and gives some considerations for future research.
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Leire Elgarresta-Ugartemendia, Mariangélica Martínez Chávez and Nerea González-Eguía
This paper aims to identify the variables to measure the impact of the joint venture (JV) on the performance of its partner companies, considering all performance dimensions…
Abstract
Purpose
This paper aims to identify the variables to measure the impact of the joint venture (JV) on the performance of its partner companies, considering all performance dimensions studied in the literature.
Design/methodology/approach
A systematic literature review (SLR) was conducted using Preferred Reporting Items for Systematic Review and Meta-Analysis (PRISMA) protocol guidelines. The study identified 27 articles published between 2000 and 2023 in research areas of business economics, business, management and accounting and economics, econometrics and finance that discuss the effect of JVs on their partners firm performance. The term JV was defined in accordance with the definition of the author Paul Beamish, a renowned author in numerous academic journals, applying in the field of joint venture and performance.
Findings
The results show that the effect of JVs on the performance of their partner companies has been studied in companies around the world, from multiple perspectives and indicators, and mainly through the application of statistical methods such as regression analysis.
Originality/value
The current study contributes significantly to the existing and understudied body of knowledge in the literature on the effects of JV development on its partner firm’s performance.