Market valuation of joint ventures: Joint venture characteristics and wealth gains (original) (raw)
1997, Journal of Business Venturing
Along with R&D and capital investment, interfirm linkages like joint yen-EXECUTIVE tures have been widely used by American corporations as an investment tool SUMMARY to enhance their entrepreneurial capabilities and long-run competitiveness. Today, it has become a common belief that cooperative strategy is the new form of competition facing the recent development in the world economy, technology, and corporate strategy, Companies use interfirm coordination to acquire new technologies and expand their product/market reach, which is the crux of corporate entrepreneurship, lnterfirm linkages expand information and resource access by widening the sweep of environmental scanning for a firm and by linking with complementary assets in other corporations. And corporate entrepreneurialism through the pursuit of innovative capabilities or administrative structures is at the nexus of joint venturing among domestic or cross-border partners. Studies have consistently shown that the payoff of corporate entrepreneurship like joint ventures is long-term in nature. However, it is well known that for American managers, the biggest obstacle to long-run or entrepreneurial decision-making is the stock market. The business press and writers have claimed that the stock market forces managers to take a short-run view in their decision-making and deters corporate entrepreneurship. However, this claim is still not solidly grounded in empirical findings. The present study attempted to provide such evidence by examining wealth gains, i.e., stock market valuation, from corporate entrepreneurship of joint venturing between independent companies. Investors have an incentive to gather information and judge whether entrepreneurial decisions are good or bad in max
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