Abstract
This paper employs a simple stochastic model to investigate how transaction cost and strategic option considerations interact to influence a firm's evaluation of collaborative venturing as a market entry mode. After demonstrating how uncertainty about the market and about the potential partner can add to the value of a collaborative venture, the paper explicates a condition under which the option to acquire or sell out generates a positive economic value for both of the partners. The interaction of transaction cost and strategic option considerations is then examined, and a number of testable hypotheses are proposed based on the theoretical analyses of the paper.
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*Tailan Chi (Ph.D., University of Washington) is Assistant Professor of International Business in the School of Business Administration, University of Wisconsin-Milwaukee. His research interests include interfirm exchange in knowledge-based assets, investment decision-making under uncertainty, and organization structure of multinational enterprises.
**Donald J. McGuire is a Doctoral Candidate in the School of Business Administration, University of Wisconsin-Milwaukee. His research interests include real options, fixed income securities, and foreign exchange markets.
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Chi, T., Mcguire, D. Collaborative Ventures and Value of Learning: Integrating the Transaction Cost and Strategic Option Perspectives on the Choice of Market Entry Modes. J Int Bus Stud 27, 285–307 (1996). https://doi.org/10.1057/palgrave.jibs.8490136
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DOI: https://doi.org/10.1057/palgrave.jibs.8490136