The Effects of Agency Problems on the Stability of the International Joint Venture

Baek, H. Young; Soonhong Min; Sungmin Ryu
December 2006
Multinational Business Review (St. Louis University);Winter2006, Vol. 14 Issue 3, p53
Academic Journal
We introduce agency and team production theories to explain the international joint venture (IJV) phenomenon. We regard IJV partners as participants in a team production and identified agency conflicts among partners as well as between parents and IJV affiliates. We empirically test the stability of IJVs with such determinants as the existence of monitoring principal, the history of repeated exchanges between partners, the efficiency of mutual monitoring by partners, the efficiency of affiliate monitoring by parent firms, and the degree of international experience of the partners. The test results show that the existence of monitoring principal and the degree of international experience prove to be significant factors for IJV stability.


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