Document Type

Article

Publication Date

4-2020

DOI

10.1016/j.lrp.2018.10.006

Publication Title

Long Range Planning

Pages

101856 (19 pp.)

Abstract

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.

Comments

This is the Post Print of the article published in Long Range Planning April 2020, Volume 53, Issue 2. The final, published version is available at: https://www.sciencedirect.com/science/article/abs/pii/S0024630117304211

ORCID

0000-0001-7207-2714 (Klijn)

Original Publication Citation

Duplat, V., Klijn, E., Reuer, J., & Dekker, H. (2018). Renegotiation of joint venture contracts: The influence of boards of directors and prior ties as alternative governance mechanisms. Long Range Planning, 101856. doi: 10.1016/j.lrp.2018.10.006

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