Optimal Ownership Structures in Asymmetric Joint Ventures

Queen Mary & Westfield College Economics Working Paper No. 411

30 Pages Posted: 11 Sep 2000

See all articles by Paul Belleflamme

Paul Belleflamme

CORE and Louvain School of Management, UCL (Université Catholique de Louvain); CESifo (Center for Economic Studies and Ifo Institute)

Francis Bloch

University of Angers - Research Group in Quantitative Saving (GREQAM); National Center for Scientific Research (CNRS)

Date Written: April 2000

Abstract

This paper investigates the relation between asymmetries in the distribution of shares in joint ventures and asymmetries between the parent companies. When the joint venture and the parent companies are controlled by separate entities, we provide a simple formula to compute the optimal ownership structure. This formula is applied to various models of market interaction, showing that larger companies should have a larger fraction of shares, and so should companies whose goods are closer substitutes of the product of the joint venture, or companies who have a higher cost of transformation of the input produced by a joint venture.

Keywords: Joint ventures, strategic alliances, ownership structure, asymmetries

JEL Classification: D43, L13, L22

Suggested Citation

Belleflamme, Paul and Bloch, Francis, Optimal Ownership Structures in Asymmetric Joint Ventures (April 2000). Queen Mary & Westfield College Economics Working Paper No. 411. Available at SSRN: https://ssrn.com/abstract=235306 or http://dx.doi.org/10.2139/ssrn.235306

Paul Belleflamme (Contact Author)

CORE and Louvain School of Management, UCL (Université Catholique de Louvain) ( email )

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CESifo (Center for Economic Studies and Ifo Institute)

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Francis Bloch

University of Angers - Research Group in Quantitative Saving (GREQAM) ( email )

Centre de la Vieille Charité
2, rue de la Charité
Marseille, 13002
France

National Center for Scientific Research (CNRS) ( email )

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Paris, 75006
France

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