A theory of joint venture instability under inter-partner learning

The primary reason why foreign and local partners form international joint ventures is the synergy between their different competencies. However, such enterprises may break up due to a host of endogenous and exogenous factors. The evidence indicates that inter-partner learning of each other's competencies during operation of the enterprise is an important reason for JV instability. This paper contributes to the theory of JV formation and instability founded on synergy and inter-partner learning. We show that the JV is likely to break up if the learning effect is stronger than the synergy effect. Finally, we provide a comparative static analysis.