Cultural Compatibility and Joint Venture Instability A Theoretical Analysis

Abstract

Operational success of a venture firm essentially depends on the cultural compatibility of the partners. This paper draws attention to the country specific cultural characteristics and partner asymmetry as being the fundamental cause of joint venture instability and break down. Given that one partner has asymmetric information about the type of the other partner, a separating equilibrium is more likely to be the outcome if high state nature is the realization.