Revenue Sharing and Control Rights in Team Production: Theories and Evidence from Joint Ventures

73 Pages Posted: 5 Jun 2003

See all articles by Chong-En Bai

Chong-En Bai

The University of Hong Kong - School of Economics and Finance; University of Michigan - William Davidson Institute

Zhigang Tao

The University of Hong Kong - School of Business

Changqi Wu

Hong Kong University of Science & Technology (HKUST) - Department of Economics

Date Written: January 2003

Abstract

This paper presents a model of the joint venture that is grounded in the stylized facts we found from a sample of 200 joint venture contracts. The model incorporates the revenue-sharing contract into the incomplete contract frameworks of Grossman-Hart-Moore Property Rights Theory and the Transaction Cost Theory of the firm, and emphasizes the impact of expropriation. Joint control can be optimal as well as unilateral control. Our econometric analysis of the revenue sharing and control arrangements offers strong support to our Property-Rights-Theory motivated model with self investment but rejects that with cooperative investment. The Transaction-Cost-Theory motivated model leaves some important empirical findings unexplained. Our findings also reject some of the existing theories of joint ownership.

Keywords: Joint Ventures, Control Right, Revenue-sharing Contracts, Expropriation, Theory of the Firm

JEL Classification: D23, L14, L23

Suggested Citation

Bai, Chong-En and Tao, Zhigang and Wu, Changqi, Revenue Sharing and Control Rights in Team Production: Theories and Evidence from Joint Ventures (January 2003). Available at SSRN: https://ssrn.com/abstract=404001 or http://dx.doi.org/10.2139/ssrn.404001

Chong-En Bai (Contact Author)

The University of Hong Kong - School of Economics and Finance ( email )

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University of Michigan - William Davidson Institute ( email )

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Zhigang Tao

The University of Hong Kong - School of Business ( email )

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China
(852) 2857-8223 (Phone)
(852) 2858-5614 (Fax)

Changqi Wu

Hong Kong University of Science & Technology (HKUST) - Department of Economics ( email )

Clear Water Bay
Kowloon, Hong Kong
China

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