The termination of international joint ventures: Closure and acquisition by domestic and foreign partners

• We examine three modes of joint venture (JV) termination.
• Acquisition is more likely by the partner who previously owned the company.
• Acquisition is more likely by the partner who owns large equity shares.
• Acquisition is more likely by the partner who increases their equity share.
• Closure is negatively related to size, pre-existing JVs and knowledge intensity.

We study different modes of terminating international joint ventures, namely closure and acquisition, and find that different forces govern the two termination modes. Decisions regarding asset specificity and the size of the venture affect the likelihood of closure, but not that of acquisition. In contrast, full acquisition by one of the partners is related to history of the venture before the joint venture was formed, to decisions made at the time of the creation with respect to equity split between partners, and to subsequent changes of these initial decisions. Joint ventures that were created de novo are more likely to be closed down than those that were previously fully owned by one of the parties. The proportion of equity initially held by each partner and subsequent increases in this proportion increase the likelihood of the venture being fully acquired by that partner.