International Expansion Through Sequential Investment: The Effects of National Culture on Buyouts and Dissolutions in Biotechnology Partnerships

Abstract

This study examines the role of national culture on an issue which is central to competitive strategy: whether to maintain flexibility or commit to a strategic direction. We consider that equity investments in foreign partners may be initiated as the first step in a sequential acquisition process. Applying a competing hazard model to a sample of 168 joint ventures and minority equity collaborations in the biotechnology industry, we find that cultural characteristics have some bearing on a firm's willingness to commit through partner acquisition or partnership dissolution, and its preference for flexibility embodied in maintaining an equity collaboration.

JEL Classification: G31, G32, G34