Revenue Sharing and Control Rights in Team Production: Theories and Evidence from Joint Ventures
73 Pages Posted: 5 Jun 2003
Date Written: January 2003
This paper presents a model of the joint venture that is grounded in the stylized facts we found from a sample of 200 joint venture contracts. The model incorporates the revenue-sharing contract into the incomplete contract frameworks of Grossman-Hart-Moore Property Rights Theory and the Transaction Cost Theory of the firm, and emphasizes the impact of expropriation. Joint control can be optimal as well as unilateral control. Our econometric analysis of the revenue sharing and control arrangements offers strong support to our Property-Rights-Theory motivated model with self investment but rejects that with cooperative investment. The Transaction-Cost-Theory motivated model leaves some important empirical findings unexplained. Our findings also reject some of the existing theories of joint ownership.
Keywords: Joint Ventures, Control Right, Revenue-sharing Contracts, Expropriation, Theory of the Firm
JEL Classification: D23, L14, L23
Suggested Citation: Suggested Citation