Firm Performance and Joint Venturing

The objective of the paper is to evaluate the relationship between different levels of capital participation stakes (evolving entry modes) for subsidiary performance. This is possible using a unique longitudinal panel for Turkey’s largest firms (top 1000) that gives access to observe changes in foreign and local capital participation stakes and firm performance over the period 1993-2008. The results suggest that the international joint venture (IJV) strategy carries both great risk and high returns in Turkey as the dilemma of the impossible choice between transaction and transfer cost lead us to believe. Investors who chose IJVs on average perform better on profitability than other investors, but when R&D intensive investors chose IJVs they do not benefit to the same extent. Oppositely are investors in services that chose the IJV mode more likely to outperform other foreign entry modes. Results for the alternative performance measure (productivity) suggest that there is little difference in performance once the foreign partner obtains control. Over time it is found that IJVs are at least as stable as almost any other type of firm in Top 1000. In Turkey IJVs are more likely to be bought back by the domestic firm than to be bought out by the foreign firm. They are also more persistent since they are less likely to exit top 1000 relative to any other type of firm