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Option to acquire or divest a joint venture
Author(s) -
Chi Tailan
Publication year - 2000
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/(sici)1097-0266(200006)21:6<665::aid-smj109>3.0.co;2-0
Subject(s) - divestment , operationalization , joint venture , structuring , joint (building) , industrial organization , business , ex ante , value (mathematics) , microeconomics , economics , finance , computer science , commerce , engineering , philosophy , epistemology , machine learning , architectural engineering , macroeconomics
This paper develops a model for assessing options in joint ventures. The model is used specifically to examine the option to acquire or divest a joint venture, both in the case where the acquisition/divestiture price is specified ex ante in the initial contract and in the case where the price is to be negotiated ex post. The results derived from the model show how the value of the option and each partner's pay‐off from the venture vary with the structure of the option and how the presence of the option may affect the structuring of the joint venture. The main theoretical insights are stated in 12 potentially testable propositions, and possible ways to operationalize some of the propositions for empirical testing are also explored. Copyright © 2000 John Wiley & Sons, Ltd.