I will use the first article for define the entry strategies The second article for see the growth option value of investments in emerging economies. Alternative modes of entry—greenfield, acquisition, and joint venture (JV)—allow firms to overcome different kinds of market inefficiencies related to both characteristics of the resources and to the institutional context. In a weaker institutional framework, JVs are used to access many resources, but in a stronger institutional framework, JVs become less important while acquisitions can play a more important role in accessing resources that are intangible and organizationally embedded

1. Joy
Elly
Tulung
–
PhD
Student

2. AGENCY
COSTS
AND
THE
PERFORMANCE
IMPLICATIONS
OF
INTERNATIONAL
JOINT
VENTURE
INTERNALIZATION
PARENT
FIRM
INTERNATIONAL
PERFORMANCE
JOINT
VENTURES
ACROSS
AND
THE
VALUE
OF
INTERNATIONAL
GROWTH
OPTIONS
JOINT
VENTURE
LIFE-­‐
CYCLE
STAGES
INSTITUTIONS,
RESOURCES,
AND
ENTRY
STRATEGIES
IN
EMERGING
ECONOMIES

3. Previous
Appropriate
research
mode
of
entry
analysis
focused
on
is
a
includes
two
major
fundamental
brownfield
entry
modes
decision
for
investment
(acquisitions
MNEs
&
greenfields)

4. Strategy
of
a
MNE
Resource
Resource
availability/
availability
strategy
Mode
Choice

5. Transaction
Cost
Theory
(TCT)
Resource
Based
View
(RBV)
Integration
and
Adaptation
Costs
(I&A)

6. Resources
of
the
• assets,
e.g.
technology,
market
power,
brand
name,
reputation,
local
customer
base
and
Local
Firm
distribution
channels
Resources
of
the
• transferable
knowledge,
managerial
Investor
service
and
financial
capital
Resources
available
• real
estate,
labor
skills,
and
access
on
the
Market
to
utilities

7. Brownfield
Investment
Formally
an
acquisition,
but
it
closely
resembles
the
greenfield
in
its
organization
Purchase
of
an
existing
firm,
which
within
a
short
period
of
time
is
totally
restructured
Local
resources
replaced
with
resources
of
the
investor
The
advantages
of
brownfield
may
compensate
for
the
downsides
of
greenfield
entry

8. Brownfield
is
an
attractive
alternative
entry
mode
for
global
companies
investing
in
transition
economies

9. Global
Strategy
Multidomestic
Strategy

10. Klaus
Meyer,
Saul
Estrin,
Sumon
Bhaumik,
Mike
Peng

11. Efficiency
of
Transaction
Business
Institution
Market
Costs
Strategies
• Contract
enforcement
• Finding
partners
Design
the
• Information
Asymmetry
• Negotiating
and
enforcing
• Mechanism
contract
organizational
forms
The
rules
of
the
games
• uncertainty
• Measures
quality
of
products
that
minimize
• etc
opportunity
costs
(Max.
Revenue)

12. ¡ “how
do
foreign
firms
adapt
entry
strategies
when
entering
emerging
economies?"

13. Entry
Mode
Choice
(Kogut
Institution
and
Entry
&
Singh,
1988;
Anand
&
Strategy
Delios,
2002;
Elango
&
• Legal
Framework
and
Sambharaya,
2004)
Enforcement
• Greenfield
• Property
Rights
• Acquisition
• Information
Systems
• JV
• Regulatory
Regimes

14. Hypothesis
1(H1):
• The
stronger
the
market-­‐
supporting
institutions
in
an
emerging
economy,
the
less
likely
foreign
entrants
are
to
enter
by
joint
venture
(as
opposed
to
greenfield
or
acquisition).
Hypothesis
2a
(H2a):
• The
stronger
the
need
to
rely
on
local
resources
to
enhance
competitiveness,
the
less
likely
foreign
entrants
are
to
enter
an
emerging
economy
by
greenfield
(as
opposed
to
acquisition
or
joint
venture).
Hypothesis
2b
(H2b):
• The
effect
of
Hypothesis
2a
is
stronger
when
requiring
intangible
assets
compared
to
tangible
assets.
Hypothesis
3a
(H3a):
• Under
conditions
of
strong
institutions,
the
greater
the
need
of
foreign
entrants
for
intangible
resources,
the
more
likely
they
are
to
use
acquisition
or
joint
venture
rather
than
greenfield.
Hypothesis
3b
(H3b):
• Under
conditions
of
strong
institutions,
the
need
for
local
tangible
resources
will
not
influence
the
choice
of
entry
mode.

15. ¡ Sample
§ Four
emerging
economies
▪ Egypt,
India,
South
Africa,
and
Vietnam
§ Questionnaire
§ Base
Population
§ Random
Sampling
§ Interviews
§ 613
responses
were
received

16. Institutional
and
resource
effects
crucially
interact.
Strengthening
the
institutional
environment
directly
encourages
acquisition
and
greenfield
entry
at
the
expense
of
JV
entry.

17. First,
a
pertinent
question
for
empirical
studies
is
always
whether
the
empirical
relationships
identified
in
the
study
could
be
explained
by
different
mechanisms
than
those
proposed
by
the
authors.
A
second
concern
is
the
quality
of
proxies.
They
collected
local
data
to
get
as
close
as
possible
to
the
context
(the
focus
of
our
research),
and
thus
distinguish
ourselves
from
earlier
study
designs
driven
by
MNE
headquarters
perspectives.
Third,
They
only
investigate
equity-­‐based
foreign
entry
modes
(Tse
et
al.,
1997)
and
do
not
differentiate
levels
of
subsidiary
ownership
(Dhanaraj
and
Beamish,
2004).

18. Jeffrey
J.
Reuer
&
Kent
D.
Miller

19. Parent
firm
Event
studies
generally
find
a
positive
average
shareholder
performance
wealth
effect
associated
with
venture
formation.
Balakrishnan
&Koza
implications
(1993);
Lummer
&McConnell
(1990);
and
McConnell
&
Nantell
(1985)
(1991);
Chen,
Hu,
&Shieh
(1991);
Crutchley,
Guo,
&Hansen
(1991);
Koh
&Venkatraman
of
joint
venture
(JV)
investments.
JVs
frequently
fail
to
meet
parent
firms’
objectives,
and
are
often
unstable
and
short-­‐lived.
Beamish,
(1985);
Kogut,
(1988,
1989,1991);
Blodgett
(1991,
1992);
Gomes-­‐Casseres
(1987);
Harrigan
(1985,
1986,
1988);
Killing
(1983);
Li
(1995
);Mitchell
&
Singh(
1992);
and
Pennings,
Barkema,
&
Douma
(1994)
While
scholars
have
typically
associated
JV
longevity
with
collaborative
success
and
JV
termination
with
failure.
Anderson
(1990);
Brown,
Rugman,
and
Verbeke
(1989);
Dymsza
(1988);
Parkhe
(1991);
Ring
and
Van
de
Ven
(1994);
and
Teece
(1992)

20. ¡ Recent
event
studies
of
JV
formations
agency
theory
may
be
useful
for
isolating
the
sources
of
parent
firm
valuation
effects
from
JV
investments.
¡ Lee
and
Wyatt
(1990)
conjectured
that
agency
problems
may
be
at
the
root
of
the
negative
shareholder
wealth
effects
for
the
international
joint
venture
(IJV)
formations
they
studied.

21. ¡ The
aim
of
this
study
is
to
join
standard
agency
theory
arguments
and
event
study
methodology
to
test
a
contingency
perspective
on
IJV
buyouts.

23. Empirical
research
has
found
that
parent
firm
inside
ownership
is
positively
related
to
stock
price
movements
associated
with
JV
formations
(Cordeiro,
1993;
Wild,
1994).
Wild
(1994)
observed
that
IJV
formations
also
create
more
wealth
for
parent
firm
shareholders
when
parent
firms
have
low
levels
of
free
cash
flow
or
have
high
financial
leverage
for
a
given
level
of
free
cash
flow.
Cordeiro
(1993)
reported
that
parent
firm
abnormal
returns
from
JV
formation
are
also
more
favorable
in
the
presence
of
long
term
performance
plans
and
interlocking
directorates.

24. Hypothesis
1:
• Abnormal
returns
for
the
U.S.
parent
internalizing
an
IJV
will
be
positively
related
to
the
U.S.
parent
firms’
inside
owner-­‐
ship
percentage.
Hypothesis
2:
• Abnormal
returns
for
the
U.S.
parent
internalizing
an
IJV
will
be
negatively
related
to
the
U.S.
parent
firm’s
free
cash
flow.
Hypothesis
3:
• Abnormal
returns
for
the
U.S.
parent
internalizing
an
IJV
will
be
positively
related
to
the
interaction
of
the
U.S.
parent
firm’s
leverage
and
free
cash
flow.

25. ¡ U.S.
investment
abroad
contained
in
Mergers
&
Acquisitions
¡ 75
IJV
¡ 23
different
primary
industries
¡ located
in
23
different
countries
¡ 7-­‐year
period
¡ 1988
-­‐
1994.
¡ OLS
parameter
¡ cross-­‐section

26. parent
firm
valuation
effects
are
positively
related
to
the
parent
firm
equity
owned
by
insiders
and
the
interaction
of
debt
financing
and
free
cash
flow.

27. ¡ Data
Limitations
in
regards
to
investigate
potential
asymmetries
in
parent
firm
performance
effects

28. Tony
W.
Wing,
Jeffrey
J.
Reuer,
and
Mike
W.
Peng

29. The
aim
of
this
article
is
to
extend
the
real
options
theory
of
JVs
by
accomplishing
two
objectives.
• First,
this
article
bridge
the
gap
between
theory
and
evidence
by
directly
testing
the
theory’s
central
proposition
that
JVs
confer
valuable
growth
options.
• Second,
and
related,
objective
is
to
develop
a
contingency
view
of
growth
options
in
IJVs
by
examining
how
some
key
IJV
characteristics
can
differentially
affect
firms’
growth
option
values
rather
than
invoking
real
options
arguments
in
a
universalistic
fashion
or
assuming
they
apply
to
all
such
ventures.

30. Real
Options
Theory
G r o w t h
Option
Value

31. Real
Joint
Options
Ventures
Theory

32. International
Joint
Ventures
-­‐
Hypothesis
1.
• The
greater
a
firm’s
number
of
IJVs,
the
greater
its
growth
option
value.
The
Ownership
Structure
of
IJVs
-­‐
Hypothesis
2.
• The
number
of
a
firm’s
minority
IJVs
has
a
greater
impact
than
the
number
of
its
nonminority
IJVs
on
the
firm’s
growth
op-­‐
tion
value.
The
Product-­‐Market
Focus
of
IJVs
-­‐
Hypothesis
3
• The
number
of
a
firm’s
noncore
IJVs
has
a
greater
impact
than
the
number
of
its
core
IJVs
on
the
firm’s
growth
option
value.
The
Geographic
Location
of
IJVs
-­‐
Hypothesis
4
• The
number
of
a
firm’s
IJVs
in
emerging
economies
has
a
greater
impact
than
the
number
of
its
IJVs
in
developed
economies
on
the
firm’s
growth
option
value.

33. Sample
and
Data
• 1,000
largest
U.S.
publicly
traded
companies,
based
on
their
market
value
added
(MVA)
• Besides
MVA,
the
data
set
also
pro-­‐
vides
Stern
Stewart’s
estimates
of
other
value-­‐
based
measures,
such
as
economic
value
added
(EVA),
capital
invested
(CI),
and
the
weighted
av-­‐
erage
cost
of
capital
(WACC)
Variables
and
Measurement
• Growth
option
value
• Explanatory
variables
• Control
variables
Analytical
Approach
• Several
theoretical
and
practical
considerations
drove
our
decision
to
use
panel
data
models
to
estimate
the
influence
of
various
types
of
IJVs
on
a
firm’s
growth
option
value.

34. Through
the
use
of
real
options
theory
in
the
IJV
context,
this
research
also
contributes
to
the
IJV
literature
by
uniting
three
important
IJV
attributes:
ownership
structure,
product-­‐market
focus,
and
geographic
location.
diversifying
IJVs
might
provide
one
explanation
for
the
contradic
tory
results
in
prior
studies.
that
firms
do
not
generally
derive
growth
option
value
from
their
IJVs
in
emerging
economies
in
certain
ways
challenges
recent
arguments
that
growth
options
provide
an
important
rationale
for
firms’
investments
in
these
locations
.
This
findings
may
reflect
the
high
failure
rate
of
JVs
in
general,
and
in
emerging
economies
in,
yet
other
more
specific
explanations
are
also
plausible.

35. ¡ The
findings
also
challenge
recent
claims
about
the
growth
option
value
of
investments
in
emerging
economies.

36. Used
of
the
Stern
Stewart
data
set
helped
this
obtain
a
relatively
accurate
estimate
of
growth
option
value.
Although
this
is
a
contribution
of
the
article,
it
might
limit
the
generalizability
of
the
findings.
Opportunities
also
exist
to
extend
the
empirical
approach
to
other
international
investments
contexts
where
real
options
theory
is
applicable.
This
paper
focus
on
JVs
concerns
firms’
external
corporate
development
activities,
but
a
wide
range
of
internal
investment
activities
can
similarly
provide
valuable
growth
options,
such
as
investments
in
technology
development
projects
and
investments
in
new
product
lines.

37. Jeffrey
J.
Reuer
INSEAD

38. Total
Value
Parent
Firms
International
Joint
Venture
• Investment
Decision
• Processes
• Broader
Strategic
Events
• Environmental
Context

39. ¡ Examine
parent
firm
performance
outcomes
across
IJV
life-­‐cycle
stages
by
using
event
study,
methodology
to
evaluate
the
shareholder
wealth
effects
of
IJV
formation
and
IJV
Termination

40. Research
Question
What
are
the
parent
firm
valuation
effects
of
IJV
formation
and
different
types
of
IJV
termination?
How
do
the
shareholder
wealth
effects
of
IJV
formation
and
IJV
termination
relate
to
each
other?
More
specifically,
to
what
extend
are
the
valuation
patterns
consistent
with
sequential
adaptation,
corrective
decisions,
inappropriate
termination
of
attractive
ventures
or
simply
poor
management?

41. The
corporate
effects
of
collaboration
by
investigating
the
reactions
of
parent
firm’s
share
prices
to
announcements
of
alliance
formation
• (Das,
Sen
&
Sengupta,
1998;
Koh
&
Venkatraman,
1991)
The
effects
of
alliances
on
parent
firm
survival
•
(Singh
&
Mitchell,
1996)
Parent
firm
or
IJV
managers’
perceived
satisfaction
with
IJVs
• (
Geringer
&
Herbert,
1991)

42. The
parent
firm
valuation
implications
of
IJV
formation
has
produced
rather
mixed
findings
• Firms
generally
obtain:
•
Positive
abnormal
return
when
announcing
the
formation
of
on
IJV
(Chen,
Hu
&
Shieh,
1991;
Grutchley,
Guo
&
Hansen,
1991;
Gupta,
McGowan,
Misra
and
Missirian,
1991)
• An
average
valuation
effect
that
is
negative
(Chung,
Koford,
&
Lee,
1993;
Lee
&
Wyat,
1990)
• Insignificant
(Finnerty,
Owers,
&
Rogers,
1986;
Merchang,
1997)

43. Sample
• Predicast’s
Funk
and
Scott(F&S)
Index
and
Lexis-­‐Nexis
Company
news
Library
• US
Parent
firms
• The
Venture
based
outside
US
• 1985-­‐1995
• 215
IJV’s
• Average
year
6.7
• 35
Countries
Methodology
• Event
Study
methodology

44. Valuation
patterns
reported
Provide
evidence
that
both
IJV
here
also
reveal
the
formation
and
IJV
termination
complexity
of
the
relationships
life-­‐cycle
stages
hold
out
between
IJV
life-­‐cycle
stages
opportunities
for
parent
firms
and
the
performance
to
create
shareholder
value
implications
for
parent
firms.
The
present
evidence
for
IJVs
reveals
interesting
similarities,
as
well
as
differences,
with
prior
findings
on
alternative
corporate
investments
such
as
acquisitions
and
divestitures

45. The
evidence
on
the
shareholder
wealth
effects
of
IJV
The
empirical
results
suggest
a
termination
indicates
the
place
for
transitional
importance
of
this
stage
of
the
collaborations
in
firms’
IJVs
life
cycle
in
determining
the
corporate
portfolios
total
value
that
a
firm
derives
or
loses
from
collaboration
Alliance
writings
have
a
long
emphasized
flexibility,
risk
sharing,
and
low
switching
costs
as
important
benefits
of
alliances.

46. The
present
paper’s
international
focus
reflect
the
significance
of
IJVs
in
parent
firms’
corporate
strategies
and
the
fact
that
much
of
the
literature
on
JV
instability
has
been
developed
in
the
IB
field
Similar
research
also
could
be
conducted
in
a
domestic
setting
Event
study
methodology
is
also
limiting
in
some
important
respects

47. THANKS
FOR
YOUR
ATTENTION