Structural determinants of joint venture performance

In this paper we sketch a theory of the motives of alliances and joint ventures, deduce the reasons for their instability, and discuss the structural factors that affect their performance. We argue that the alliance literature, by focusing on knowledge internalization, has given short shrift to the empirically more important motive of knowledge access, a strategy we call ‘cooperative specialization’. Cooperative specialization allows firms to pool their competencies with those of their partner and to specialize in what they do best, but it also exposes them to opportunism. We discuss how such opportunism can be checked by proper structural design. The main issue is how to reward partners for their contribution to the alliance, and two main contractual forms are possible, ex ante and residual‐sharing contracts, a category which includes equity joint ventures. Focusing on the latter, we investigate how various structural solutions can be used to align the interests of the joint venture partners.