Are joint ventures positive sum games? The relative effects of cooperative and noncooperative behavior

• Published in: Strategic management journal Vol. 32; no. 1; pp. 32 - 54
• Main Author: Kumar, M. V. Shyam
• Format: Journal Article
• Language: English
• Published: Chichester, UK John Wiley & Sons, Ltd 01.01.2011; John Wiley & Sons; Wiley Periodicals Inc
• Subjects: Alliances; Business networks; Business organization; Business structures; Business studies; Cooperation; Corporate planning; Corporate strategies; Dyadic relations; event studies; Industrial market; Joint ventures; Knowledge bases; Network analysis; Non-zero sum games; Organizational analysis; Organizational behavior; Organizational behaviour; Organizational structure; P values; Positive sum games; resource-based view; Securities markets; Simultaneous equations; Studies; transaction cost economics; value creation
• ISSN: 0143-2095; 1097-0266
• DOI: 10.1002/smj.867

Are joint ventures (JVs) characterized mainly by cooperative behavior or noncooperative behavior? In this research, we address this question by examining the interrelationship between the values created for two partners when they announce a JV. We argue that, on average, if cooperative behavior and common benefits are more influential than noncooperative behavior and private benefits, there will be a positive association between the values created for the two partners. Conversely, if private benefits and noncooperative behavior are more influential, there will be a negative association as partners derive value at the expense of each other rather than by creating new opportunities through the JV. Using a sample of 344 JVs we find evidence of a positive association between the values created for the two partners after controlling for various factors. This suggests that the stock market perceives JVs to be positive sum games rather than zero sum games, and that value creation in JVs is mainly attributable to synergies rather than appropriation of resources. Our analysis also reveals other conditions under which cooperative behavior and noncooperative behavior become dominant, such as the strength of the resources of the two partners, product market competition, and JV experience.