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Topic 4 Reading Child Et Al. (Chapter 12) Notes

Accounting Notes > Strategic Finance, Digitization and Extended Enterprises Notes

This is an extract of our Topic 4 Reading Child Et Al. (Chapter 12) document, which we sell as part of our Strategic Finance, Digitization and Extended Enterprises Notes collection written by the top tier of LSE students.

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AC310: Topic 4: Reading: Child, Faulkner and Tallman 2005 - Cooperative Strategy
- Chapter 12 (Corporate Governance of Joint Ventures)

Topic 4: Reading -Child et al. 2005 - Cooperative Strategy -Chapter 12 (Corporate Governance of Joint Ventures) Introduction

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Partners to an alliance are investors in it o Govern to:
? Minimize risk
? Maximize likelihood of good return IJV = International Joint Venture o What are the risks of investing in an IJV?
? Financial
? Resource
? Market requirements o What are the sources of the risks?
? Institutional and economic
? Special condition of multiple agency that pertains in JV's Alliance control seen as significant to performance Alliance governance particularly important when structured in corporate form such as EJV (Equity Joint Venture) JV's neglected in corporate governance JV's have a relatively high failure rate o Usually due to breakdown in relations between owning partners (Singh and Mitchell 1996) o Cultural differences cause problems in IJV's "IJV's can promote economic development through knowledge transfer to local partners" Broad definition of corporate governance: o Process of control over and within the firm o Aims to reduce risks to owners o Ensure the firms activities bring a stream of acceptable returns to those owners in the long term Some management accounting experts focus more on structural and external aspects of governance - (Monks and Minow 2001)

Risks

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Institutional and economic source of risk to a foreign IJV partner: o Known as 'contextual risks' o Involve relationships between the venture and the local environment and are linked to 'locational' features - (Dunning 1998) o Institutional:

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