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A transaction costs theory of equity joint ventures
Author(s) -
Hennart JeanFrancois
Publication year - 1988
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/smj.4250090406
Subject(s) - transaction cost , equity (law) , business , scope (computer science) , industrial organization , economies of scale , economies of scope , database transaction , joint (building) , microeconomics , joint venture , theory of the firm , scale (ratio) , economics , finance , commerce , marketing , architectural engineering , physics , quantum mechanics , political science , computer science , law , programming language , engineering
This paper presents a transaction costs theory of equity joint ventures. It distinguishes between ‘scale’ and ‘link’ JVs. Scale JVs arise when parents seek to internalize a failing market, but indivisibilities due to scale or scope economies make full ownership of the relevant assets inefficient. Link JVs result from the simultaneous failing of the markets for the services of two or more assets whenever these assets are firm‐specific public goods, and acquisition of the firm holding them would entail significant management costs.