Cultural distance and the pattern of equity ownership structure in international joint ventures

Mo Yamin, Sougand Golesorkhi

Research output: Contribution to journalArticlepeer-review

Abstract

This paper develops and tests hypotheses linking cultural distant to the ownership distribution of equity capital across the partners in international joint ventures (IJVs). The paper's underpinnings are linked to the role of equity shares in providing performance guarantees in joint ventures (JVs). It argues that for IJVs based in the home country of one of the partners, the vulnerability of the foreign partner to expropriation of partnership rents increases with its cultural distance from the home partner. We argue this implies the foreign partner is likely to own a smaller equity share of the IJV. Similar hypotheses are formulated with respect to whether the IJV partners are from the same or different triad regions, and cultural clusters. The hypotheses are tested with data on 442 UK-based joint ventures. Our empirical results demonstrate a significant impact of cultural distance on the pattern of equity ownership in IJVs. © 2009 Elsevier Ltd.
Original languageEnglish
Pages (from-to)457-467
Number of pages10
JournalInternational Business Review
Volume19
Issue number5
DOIs
Publication statusPublished - Oct 2010

Keywords

  • Cultural distance
  • International joint ventures
  • Joint venture governance

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