Organizational Status Change of Joint Venture: The Buyout by One Parent

Abstract

Purpose: This study aims to discuss the buyout of joint ventures by one parent. Design/Methodology/Approach: Focusing on termination through acquisition by one parent, the paper suggests the testable proposition that explains a possible inverted U-shaped relationship between the likelihood of a focal parent acquiring a JV and the similarity of the JV to the focal parent. Findings: We propose that the likelihood of a focal parent acquiring a JV is likely to increase and then decrease as the JV similarity to the focal parent increases. Practical implication: This study can provide practical implications for firms from a more neutral standpoint. Firms that want to keep long-term relationships and operate JVs with their partners should be concerned about how JVs turn out over time. Originality/Value: This study can provide some normative implications for successfully maintaining JV relationships. Particularly in the case of international JVs, local companies that shake hands with aggressive foreign companies (often eager to obtain local market knowledge) face the situation in which they are forced to sell their stake to the foreign partner. Frequently, local companies are satisfied with a bit of advanced technology transfer from their partners and thus, foreign partners easily own the JVs. However, once the companies in JV relationships understand the dynamics of evolving JVs and the tendency of acquisition based on similarity, companies can make more careful strategies in raising their JVs.