The assignment of call option rights between partners in international joint ventures

Tony W. Tong · Sali Li

35 citations0/0 files storedStrategic Management Journal

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Abstract

We examine call option rights as a contractual clause in international joint ventures ( IJVs ) and propose that the assignment of the call option right in an IJV is determined by certain ex ante asymmetries between the partners. Results show that between the two partners in an IJV , the firm with greater complementarity with the venture and greater prior IJV experience is more likely to hold the call option right; in addition, the firm's contractual choice on the call option right and its ownership choice on a greater initial equity stake are substitutive. Our focus on explicit call options advances the real options theory of collaborative agreements, and our results also highlight that option rights be considered an important part of alliance design . Copyright © 2013 John Wiley & Sons, Ltd.

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References

1983Limited-dependent and qualitative variables in econometrics 1986The Economic Institutions of Capitalism 1988The Effect of National Culture on the Choice of Entry Mode 1991Competition for competence and interpartner learning within international strategic alliances 2003Options, Futures and Other Derivatives 2002Do formal contracts and relational governance function as substitutes or complements?1995Social Structure and Alliance Formation Patterns: A Longitudinal Analysis 1988A transaction costs theory of equity joint ventures

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