TY - JOUR

T1 - Dynamically stable corporate joint ventures

AU - Yeung, D.W.K.

AU - Petrosyan, L. A.

PY - 2006/3

Y1 - 2006/3

N2 - As markets continue to become global and firms become more international, corporate joint ventures provide firms with opportunities to rapidly create economies of scale and learn new skills and technologies that would be very difficult for them to obtain on their own. However, it is often observed that after a certain time of cooperation, some firms may gain sufficient skills and technology that they would do better by breaking up from the joint venture. This is the well-known problem of time inconsistency. In this paper, we consider a dynamic joint venture which adopts the shapley value as its profit allocation scheme. A compensation mechanism distributing payments to participating firms at each instant of time is devised to ensure the realization of the shapley value imputation throughout the venture duration. Hence time-consistency is attained, and a dynamically stable joint venture results. Extension of the analysis to a stochastic environment is also made. It is the first time that stable joint venture is analyzed both deterministically and stochastically in a dynamic environment. (C) 2005 Elsevier Ltd. All rights reserved.

AB - As markets continue to become global and firms become more international, corporate joint ventures provide firms with opportunities to rapidly create economies of scale and learn new skills and technologies that would be very difficult for them to obtain on their own. However, it is often observed that after a certain time of cooperation, some firms may gain sufficient skills and technology that they would do better by breaking up from the joint venture. This is the well-known problem of time inconsistency. In this paper, we consider a dynamic joint venture which adopts the shapley value as its profit allocation scheme. A compensation mechanism distributing payments to participating firms at each instant of time is devised to ensure the realization of the shapley value imputation throughout the venture duration. Hence time-consistency is attained, and a dynamically stable joint venture results. Extension of the analysis to a stochastic environment is also made. It is the first time that stable joint venture is analyzed both deterministically and stochastically in a dynamic environment. (C) 2005 Elsevier Ltd. All rights reserved.

KW - corporate joint venture

KW - dynamic prograrnming

KW - the shapley value

KW - stochastic control

KW - RESEARCH-AND-DEVELOPMENT

KW - DIFFERENTIAL GAME

KW - INSTABILITY

KW - SPILLOVERS

U2 - 10.1016/j.automatica.2005.10.010

DO - 10.1016/j.automatica.2005.10.010

M3 - статья

VL - 42

SP - 365

EP - 370

JO - Automatica

JF - Automatica

SN - 0005-1098

IS - 3

ER -