Joint Venture Formation of Very Large Multinational Firms

Abstract

Large firms differ from smaller firms in many aspects. In this research note, we investigate the relationship between the size of firm and the characteristics of equity joint ventures (EJVs). Empirically, we found that very large firms are more likely to have a higher equity stake in their EJVs, seek alignment with other foreign firms, engage in global industries, and invest in large-scale EJVs than smaller firms. They are also less affected by the risk conditions of the host country. Empirical testing is based on a sample of 1,298 foreign EJVs in the People's Republic of China between 1981 and 1998. Interesting differences also exist among firms that are based in the U.S., Japan, and Europe.