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Strategic Interactions, Bargaining Power and Stability of Joint Venture in an Emerging Nation

Strategic Interactions, Bargaining Power and Stability of Joint Venture in an Emerging Nation We model strategic interaction between a domestic firm and a foreign firm involved in a joint venture, incorporating negotiations over equity shares and its implications for stability in the context of an emerging country. The foreign firm has superior technology, whereas the domestic firm has better local market knowledge. Modelling simultaneous innovation effort and bargaining power over equity share, we provide a rationale for the stability of the joint venture. We find that a certain level of technological knowledge can empower the bargaining power under certain parameter configurations and assumptions, such that the firms will negotiate to agree over their equity shares and maintain the joint venture. In this context, the stability of the joint venture is always an expected outcome. We have also shown that the domestic firm’s bargaining power and knowledge acquisition directly affect the domestic firm’s R&D effort and threaten the stability of the JV. We try to justify a probable situation where the firms may negotiate hard over equity shares but still maintain the joint venture. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png "Journal of Industry, Competition and Trade" Springer Journals

Strategic Interactions, Bargaining Power and Stability of Joint Venture in an Emerging Nation

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References (47)

Publisher
Springer Journals
Copyright
Copyright © The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature 2021
ISSN
1566-1679
eISSN
1573-7012
DOI
10.1007/s10842-021-00368-2
Publisher site
See Article on Publisher Site

Abstract

We model strategic interaction between a domestic firm and a foreign firm involved in a joint venture, incorporating negotiations over equity shares and its implications for stability in the context of an emerging country. The foreign firm has superior technology, whereas the domestic firm has better local market knowledge. Modelling simultaneous innovation effort and bargaining power over equity share, we provide a rationale for the stability of the joint venture. We find that a certain level of technological knowledge can empower the bargaining power under certain parameter configurations and assumptions, such that the firms will negotiate to agree over their equity shares and maintain the joint venture. In this context, the stability of the joint venture is always an expected outcome. We have also shown that the domestic firm’s bargaining power and knowledge acquisition directly affect the domestic firm’s R&D effort and threaten the stability of the JV. We try to justify a probable situation where the firms may negotiate hard over equity shares but still maintain the joint venture.

Journal

"Journal of Industry, Competition and Trade" – Springer Journals

Published: Dec 1, 2021

Keywords: Joint venture; Competition; Strategic interactions; Technology transfer; R&D; L24; O32; F23; L13

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