Abstract

http://ssrn.com/abstract=1097265
 
 

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Innocents Abroad: The Hazards of International Joint Ventures with Pyramidal Group Firms


Susan Perkins


Northwestern University, Kellogg School of Management

Randall Morck


University of Alberta - Department of Finance and Statistical Analysis; National Bureau of Economic Research (NBER)

Bernard Yin Yeung


National University of Singapore - Business School

August 1, 2012


Abstract:     
The fundamental unit of production in microeconomics is the firm, which mirrors reality in the United States and United Kingdom. But elsewhere, business groups can be the more important unit for business strategy; not the firm. We examine international joint ventures in the telecoms industry in Brazil, where pyramidal groups are ubiquitous. We explain how corporate governance differences between agency behaviors in pyramidal groups versus freestanding widely held firms can lead to joint venture failures. We find joint ventures between pyramidal group-member firms and partners from countries where pyramids are rarer have significantly elevated failure rates; while joint ventures with partners from countries where pyramidal groups are ubiquitous are more likely to succeed. We provide clinical examples illustrating the mechanisms driving divergent partnership performance.

Number of Pages in PDF File: 43

Keywords: Corporate governance, strategic alliance failure, pyramidal group ownership structure, foreign direct investment

JEL Classification: F23, G34, L96

working papers series


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Date posted: February 26, 2008 ; Last revised: February 12, 2014

Suggested Citation

Perkins, Susan and Morck, Randall and Yeung, Bernard Yin, Innocents Abroad: The Hazards of International Joint Ventures with Pyramidal Group Firms (August 1, 2012). Available at SSRN: http://ssrn.com/abstract=1097265 or http://dx.doi.org/10.2139/ssrn.1097265

Contact Information

Susan Perkins (Contact Author)
Northwestern University, Kellogg School of Management ( email )
2001 Sheridan Road
LEV 3100
Evanston, IL 60208
United States
Randall K. Morck
University of Alberta - Department of Finance and Statistical Analysis ( email )
2-32C Business Building
Edmonton, Alberta T6G 2R6
Canada
780-492-5683 (Phone)
780-492-3325 (Fax)

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Bernard Yin Yeung
National University of Singapore - Business School ( email )
1 Business Link
Biz 2 Building Level 6
Singapore 117592
Singapore
65 6516 3075 (Phone)
65 6779 1365 (Fax)
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