Institutional differences and arbitration mechanisms in international joint ventures

Research summary: We theoretically and empirically study the effects of legal institutions on the inclusion of arbitration provisions in international joint venture (IJV) contracts. Legal institutions offer a public trilateral forum to handle interpartner disputes. However, these institutions function differently across countries, which can impede IJV partners from resolving disputes effectively through court systems. Alternatively, partners can take advantage of private trilateral resolution mechanisms in the form of arbitration. We argue and demonstrate that differences among partners' home country legal institutions regarding the legal traditions, as well as the importance of procedures and costs imposed in these countries for enforcing contracts, increase the likelihood of choosing arbitration over litigation. We also compare results for partners' recourse to IJV boards as a private, bilateral means of addressing conflicts. Managerial summary: IJVs are powerful levers for market expansion and access to resources and capabilities. The risks of corrosive disputes caused by conflicting interests or misunderstandings among partners are nonetheless far from being negligible. Our study helps decision makers and managers increase their understanding of the options and remedies available for resolving disputes. We consider three mechanisms in particular: public courts, arbitration, and the board of directors. Findings show that considering the partners' home country legal environments but also the discrepancies between these environments is essential when it comes to giving preference to arbitration over public courts. Findings also suggest that decisions related to internal private ordering (i.e., relying on the JV board of directors) are driven by the exchange characteristics more than by institutional considerations

Renegotiation of Joint Venture Contracts: The Influence of Boards of Directors and Prior Ties as Alternative Governance Mechanisms

Research on alliance governance has pointed out that joint ventures (JVs) are particularly complex forms of collaboration. Partnering firms therefore often face difficulties in anticipating contingencies and collaborative behaviors at the contract negotiation stage. When initial JV contracts are incomplete, renegotiation represents a key strategic opportunity for enhancing contractual safeguards or coordination guidelines over the course of the joint venture. Costs and risks entailed by renegotiating JV arrangements at a later stage are far from trivial, however. Existing research on alliances suggests that practitioners have alternative relational and formal governance solutions at their disposal for handling possible inefficiencies caused by contractual gaps over time. Although insightful, this research does not enable a determination as to whether these alternative relational and formal mechanisms substitute for or facilitate ex post contractual renegotiation. The competing arguments found in the literature provide little guidance to JV practitioners as well. Our results show that the collaborative context within which the JV is embedded (i.e., prior inter-partner ties) obviates the need for enhancing incomplete JV contracts ex post. By contrast, ex post contractual adjustments are fostered and facilitated by the formal and administrative apparatus engaged over the course of the JV (i.e., an involved JV board of directors). Such opposing effects suggest that prior ties can “prevent” the occurrence of inefficiencies caused by contractual gaps, while an involved JV board primarily can act as a mediation and renegotiation platform to “repair” the exchange when inefficiencies occur. Our findings highlight the multidimensional nature of joint venture governance, and in particular the interplay among various formal and informal governance solutions in the execution of joint ventures. By unpacking their complex effects on the decision to renegotiate incomplete JV contracts, our study also holds important value for managers seeking to govern their JVs over time

Resort to Third Parties for the Governance of Technology Licensing Agreement : a Transaction Cost Perspective

While the literature on licensing through the Transaction Costs lens is rather extensive, the role played by third parties in the licensor-licensee relationship has received very limited attention. However, although licensing agreements are essentially dyadic exchanges, licensors and licensees frequently decide to resort to services developed by third parties in order to ease and support their licensing relationships. This support can be required at one or more contractual level(s): the identification of a licensing partner, the negotiation of the licensing contract, the monitoring of the licensing relationship, and the enforcement of the licensing contractual terms. In this paper, I propose, first, a typology of support services developed by third parties. Second, in line with the Transaction Costs arguments, I develop propositions regarding the incentives for licensing partners to resort to support services develop by third parties. I argue that this resort is contingent to the levels of asset specificity and uncertainty characterizing the licensing transaction

Role played by Intermediary Institutions in Academiy-Industry Technology Alliances

Due to the increasing complexity and pace of technological development, and the higher uncertainty and costs imposed by R&D projects, organizations have strong motives to collaborate through various modes of strategic alliances. When technology alliances simultaneously involve academy and industry organizations, the collaboration can be significantly complicated by the specific rules prevailing either in the academic environment or in the industrial environment. Academy-industry collaboration difficulties may arise for reasons of divergences in terms of motives, incentives, constraints, and organizational culture. Hence they need to be managed with specific organizational schemes. In the present paper, we propose to shed light on the role that intermediary institutions may play in academy-industry technology alliances. Indeed, when allying, academy and industry organizations can have recourse to intermediary institutions, which may help them deal with their stringent and specific collaboration difficulties. We propose in this paper to focus on a specific type of intermediary institution; namely the industry federation. On the basis of an exploratory case study on the Belgian Technology Industry Federation, AGORIA, we expose the regulatory mechanisms implemented by this intermediary institution. This paper shows how intermediary institutions such as AGORIA may mitigate the collaboration difficulties and, therefore, ease the management of academy-industry technology alliances

Intermediary Institutions and Embeddedness in Technology Networks

A wide literature in strategic management is dedicated to the study of technology networks as a locus of innovation. They shape an organizational field in which strategic alliances leverage firm capabilities to generate new knowledge and access complementary assets. Much less attention, however, has been focused on the role played by other particular players - that we label ‘intermediary institutions’ - in the institutional foundation of those networks. In the present paper, our intent is to highlight the choice made by alliance partners, members of a same technology network, to have recourse to services proposed by ‘intermediary institutions’ in order to ease their alliance relationships. We propose an analysis of the impact of this choice on the institutional design of the network as a whole. We argue that by backing up a firms’ alliance activities, ‘intermediary institutions’ deepen the relational, structural and cognitive embeddedness of the firm within its network. In turn, reinforced embeddedness helps go beyond the conflict between ‘trying to learn’ and ‘trying to protect’, typical of technology networks, and so enhances the viability of the network as a whole

Inter-firm partnerships and third parties in technological networks

To deal with the pace of technological development and the risks and costs imposed by R&D projects, firms need to collaborate and engage in technology partnerships going from licensing agreement to research joint venture. However, managers often struggle to find a right partner, to negotiate the contracts, to monitor the contractual relationships, and to enforce the contractual commitments. Entities (that we call ‘third parties’) have progressively developed skills that are highly valuable for firms wishing to engage in technology partnerships. Key third parties are technology brokers, patent attorneys, auditing firms, arbitrators, trade associations, and collective research centers. Surprisingly, the role of these third parties in technology partnerships has received extremely limited attention in the strategic management and business economics literature. This dissertation investigates the use of third-party services in technology partnerships through one theoretical and two empirical essays. We use as our frame of reference Transaction Cost Economics and Social Network Theory. Both streams of research provide specific pieces of the puzzle as we argue that relying on third parties will be variously beneficial depending on the transaction attributes and the firm’s social embeddedness. In light of this, the first essay positions the third parties in the Social Network framework. The second and third essays are empirical essays focusing on a specific form of technology partnership: the licensing agreement. The second essay investigates firms’ decision to resort to third parties at the first three contractual stages (identification, negotiation, and monitoring) and the third essay examines the last contractual stage (enforcement) through firms’ decision to include an arbitration provision in their contracts.(IAG 3) -- UCL, 200