The Role of Knowhow Acquisition in the Formation and Duration of Joint Ventures

45 Pages Posted: 6 May 2004

See all articles by Michel A. Habib

Michel A. Habib

University of Zurich; Swiss Finance Institute

Pierre Mella-Barral

Toulouse Business School

Multiple version iconThere are 2 versions of this paper

Date Written: November 2003

Abstract

We analyze the role of knowhow acquisition in the formation and duration of joint ventures. Two parties become partners in a joint venture in order to benefit from each other's knowhow. Joint operations in the joint venture provide each party with the opportunity to acquire part of its partner's knowhow. A party's increased knowhow provides the impetus for the dissolution of the joint venture, as it decreases the need for the partner's knowhow. Dissolution takes the form of the buy out of one partner by the other. We characterize the conditions under which such dissolution takes place, identify the party that buys out its partner, determine the time to dissolution, establish its comparative statics, and examine the implications of knowledge acquisition for the desirability of joint venture formation.

Keywords: Joint Ventures, Knowhow Acquisition, Optimal Dissolution Time, Continuous-Time Corporate Finance.

JEL Classification: G34

Suggested Citation

Habib, Michel A. and Mella-Barral, Pierre, The Role of Knowhow Acquisition in the Formation and Duration of Joint Ventures (November 2003). EFMA 2004 Basel Meetings Paper, Available at SSRN: https://ssrn.com/abstract=471681 or http://dx.doi.org/10.2139/ssrn.471681

Michel A. Habib (Contact Author)

University of Zurich ( email )

Plattenstrasse 14
Zurich, 8032
Switzerland
41-44-634-2507 (Phone)
41-44-634-4903 (Fax)

HOME PAGE: http://www.isb.uzh.ch/institut/profs/mhabib.htm

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Pierre Mella-Barral

Toulouse Business School ( email )

20, bd Lascrosses
Toulouse, 31068
France

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