The Choice Between Joint Ventures and Acquisitions: Insights from Signaling Theory


Jeffrey Reuer
Jeffrey Reuer
  • Speaker
Rotterdam School of Management (RSM), Erasmus University Rotterdam

Event Information

Type
Research Seminar
Programme
Strategy & Entrepreneurship
Date
Thu. 24 Feb. 2011
Contact
Time
11:00-12:30 hours
E-mail
Location
Mandeville Building T3-29
Number


Abstract

This paper extends information economics in corporate strategy and organizational governance research by using signaling theory to explain firms’ market entry modes. We exploit features of the IPO context to investigate how signals on newly-public firms shape other companies’ governance choices to form joint ventures with them versus acquire them. We also develop theoretical arguments on how the value of these signals will vary across exchange partners. The results reveal that companies are more apt to acquire versus partner with IPO firms taken public by reputable investment banks, compared to IPO firms associated with less prominent underwriters. Venture capitalist backing also appears to be a valuable signal for prospective acquirers, particularly when the acquirer and target reside in different industries and possess dissimilar knowledge bases.  We also present evidence that signals affect the target selection process and the emergence of market segmentation for joint venture partners and acquisition candidates.

 
Contact information:
Carolien Heintjes
Email
Pursey Heugens
Professor of Organization Theory, Development, and Change, Scientific Director ERIM, Dean of Research RSM
  • Coordinator