WHEN COMPETITION ECLIPSES COOPERATION - AN EVENT HISTORY ANALYSIS OF JOINT VENTURE FAILURE

Why do so many joint ventures fail? Despite the fact that their succes s is the exception rather than the rule, the literature on why joint v enture performance has been so poor remains fragmentary. We address th is issue, adopting a transaction-cost economics perspective and modeli ng joint ventures as governance structures that blend the advantages a nd drawbacks of both markets and hierarchies. Using a data base on ele ctronics industry ventures and event history analysis, we identify sev eral predictors of joint venture failure and test for their influences . A key finding is that the presence of competition between joint vent ure partners outside of the agreement significantly impairs chances fo r the operation's chance of survival. We also find clear evidence that the failure rate of joint ventures is nonmonotonic, rising to a peak in the middle term and then declining. Finally, we compare and contras t predictors of terminations due to failure to those due to acquisitio n of the joint venture by one of its partners. Our overall conclusions highlight implications for strategic choice theory-building and the m anagement of joint ventures.