A transaction costs theory of equity joint ventures
Article first published online: 29 DEC 2006
Copyright © 1988 John Wiley & Sons, Ltd.
Strategic Management Journal
Volume 9, Issue 4, pages 361–374, July/August 1988
How to Cite
Hennart, J.-F. (1988), A transaction costs theory of equity joint ventures. Strat. Mgmt. J., 9: 361–374. doi: 10.1002/smj.4250090406
- Issue published online: 29 DEC 2006
- Article first published online: 29 DEC 2006
- Manuscript Revised: 9 JUL 1987
- Manuscript Received: 2 FEB 1987
This paper presents a transaction costs theory of equity joint ventures. It distinguishes between ‘scale’ and ‘link’ JVs. Scale JVs arise when parents seek to internalize a failing market, but indivisibilities due to scale or scope economies make full ownership of the relevant assets inefficient. Link JVs result from the simultaneous failing of the markets for the services of two or more assets whenever these assets are firm-specific public goods, and acquisition of the firm holding them would entail significant management costs.