استفاده از فن آوری های نوین و بی ثباتی قرارداد جوینت ونچر
|کد مقاله||سال انتشار||تعداد صفحات مقاله انگلیسی||ترجمه فارسی|
|18047||2008||16 صفحه PDF||سفارش دهید|
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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Research in International Business and Finance, Volume 22, Issue 2, June 2008, Pages 108–123
We consider a joint venture between a local firm from a less developed country, and a foreign multinational. In a dynamic two period model, we demonstrate that the availability of new technology can trigger a joint venture breakdown, a result that is consistent with the empirical evidence. We find that such breakdown is more likely if the MNC is relatively patient, or, in contrast to the existing literature, there is an increase in the level of demand. Moreover, our results are robust to alternative assumptions regarding bargaining power and control.
In the recent years, there has been a large increase in the number of international joint ventures (JVs). Joint ventures play an important role as a vehicle for bringing in foreign direct investment, something that is critical for improving the performance of the host country.1 At the same time, however, joint ventures appear to be quite unstable (see Yan and Zeng, 1999, for a survey of this phenomenon). This has been documented by several authors, including Kogut (1989). Kogut (1989), for example, finds that out of a sample of 92 US-based JVs, about one-half had terminated their relationships by the sixth year. In the Indian context, Ghosh (1996) and Bhandari (1996–1997), among others, document cases of JV breakdown and instability in India. While there has been some recent works on joint venture instability, several aspects of this phenomena remain ill understood. This paper is motivated by one such aspect of joint venture instability, the fact that such instability may be triggered by technological issues. Miller et al. (1996) point out that firms cite conflict over technology as one of the main reasons behind joint venture instability. Lyles (1988) reports that adoption of new technologies by joint ventures led to conflicts later. In Ghosh (1996), the MNC partners often open up subsidiaries to safe guard their new technologies. For example, Unilever did set up a wholly owned subsidiary even though it had controlling rights in Hindustan Lever. Even when subsidiaries are not actually opened, this may be used as a threat to renegotiate the joint venture contract. This indeed was the case in the joint venture between GEC and Alsthom (see, Ghosh, 1996). Given the importance of joint ventures as an emerging form of business organization, we feel that this link between technology and joint venture instability deserves serious investigation. In this paper, we try to build a framework that is capable of modelling this link formally. To this end we consider a dynamic two period model of joint venture between an MNC and a local firm from a less developed country (LDC). Joint venture formation involves synergy whereby the MNC supplies the technology, whereas the domestic firm supplies knowledge of local inputs. Since the MNC has better access to technology, whereas the LDC firm has better knowledge of local conditions, such synergy implies that the joint venture has lower production costs compared to either of the parent firms (see, for example, Miller et al., 1996). We also assume that there is organizational learning (see, e.g., Beamish and Inkpen, 1995 and Hamel, 1991). Thus, once a new technology is adopted by the joint venture, the LDC firm can learn this technology quite quickly. To begin with we assume that there is an existing joint venture. We then examine what happens if a new technology, that can be either adopted by the joint venture, or by the MNC in a new subsidiary, becomes available. In case the technology is adopted by the MNC in a new subsidiary, there is JV breakdown in the sense that the JV is competed out of the market. We then provide a summary of our main results. We find that if the discount factor is large and the cost of acquiring the new technology is small, then the equilibrium outcome involves joint venture breakdown, i.e., subsidiary formation by the MNC. If, however, the cost of acquiring the new technology is at an intermediate level, then the new technology is likely to be adopted in the existing JV, whereas if it is high, then status quo is the likely outcome, i.e., the new technology is not adopted at all. The intuition behind subsidiary formation is as follows. The efficient outcome is to bring the new technology to the joint venture. But in this case there is going to be one-sided learning, leading to the domestic firm appropriating all the surplus in the second period. The MNC, by subsidiary formation, can prevent this learning from taking place. Note that a higher discount factor increases the MNC’s payoff from subsidiary formation. This, however, has no effect on the MNC’s payoff from the joint venture, since the MNC gets no payoff in the second period. Hence, an increase in the discount factor makes subsidiary formation more attractive. We then examine the robustness of our results to bargaining power and control. To this end we study two versions of the basic model, one where the MNC has control, but no bargaining power, and another where the MNC has bargaining power, but not control. We find that the incentive for JV breakdown does not depend on either factor. The intuition is as follows. Whether a JV breaks up or not depends on the MNC’s payoff from subsidiary formation, and first period joint venture payoffs. Since these do not depend on either bargaining power, or control, the result follows. However, in case a breakdown does not take place, these factors do affect whether the outcome involves status quo, or adoption of the new technology by the JV. Finally, we study the impact of an increase in the demand level on joint venture instability. In the existing literature that explains the breakdown of JVs by means of synergy and learning, an increase in demand makes JVs more stable (see Roy Chowdhury and Roy Chowdhury, 1999, Roy Chowdhury and Roy Chowdhury, 2001a and Roy Chowdhury and Roy Chowdhury, 2001b).2 In contrast, in our model an increase in demand could lead to greater instability.3 We finally relate our paper to the theoretical literature on JV instability. While there is a relatively recent and growing literature on JV instability, e.g., Kabiraj, 1999, Kabiraj et al., 2005, Lin and Saggi, 2001, Roy Chowdhury and Roy Chowdhury, 1999, Roy Chowdhury and Roy Chowdhury, 2001a, Roy Chowdhury and Roy Chowdhury, 2001b, Sinha, 2001a and Sinha, 2001b, to name a few, none of these papers examines the linkage between technology and joint venture instability. In fact, some studies, e.g., Marjit et al. (2004) and Miller et al. (1996), find that technology acquisition is one of the main motivations behind joint venture formation. Our paper builds on some key elements of the earlier literature, in particular synergy and organizational learning, to show that technological issues are key to understanding JV instability as well. Our contribution lies in building a theoretical framework capable of formalising this linkage, and in identifying the conditions under which such instability is more likely. The paper is organized as follows. The second section describes the structure of the model. The third section solves the benchmark model where the foreign MNC has both control and bargaining power. Then in two sub-sections we study the effect of a change in control and bargaining power on our results. The effect of a demand shift is studied in the fourth section. The last section gives a summary of the results. Detailed proofs of some of the results are relegated to Appendix A.
نتیجه گیری انگلیسی
Over the last few decades joint ventures have emerged as an important new form of business organization. One intriguing aspect of such ventures is that these are very unstable. Despite some recent works, several aspects of this instability remain poorly understood. This paper is motivated by one such aspect, namely the fact that such instability may be triggered by the availability of new technology. In this paper, we build a framework that is capable of modelling this link formally. We then use this framework to identify conditions that may lead to such instability. We find that such breakdown is more likely if the MNC is relatively patient, or, in contrast to the existing literature, there is an increase in the level of demand. We show that our results are robust to alternative assumptions regarding bargaining power, and control.