What makes a joint venture: Micro-evidence from Sino-Italian contracts

This paper provides new contract-level evidence on control rights allocation in order to define what makes a joint venture. Property rights theory of the firm identifies circumstances under which joint control alleviates investment distortions due to contract incompleteness. We compare predictions of the theoretical literature with actual governance structures of Sino-Italian joint ventures, as reported in a questionnaire submitted to the entire population of Italian enterprises operating in China. With an exceptional response rate of 60%, our evidence confirms most of the theoretical predictions and helps select among competing approaches to model joint ventures.