Management control in joint ventures: an analysis based on transaction cost economics and game theory

This paper addresses the question what determines management control in joint ventures. The model developed for this purpose draws on two existing frameworks. The first, by Dekker (2004), shows how control in strategic alliances can be structured around two control problems, coordination of tasks and appropriation concerns, the latter stemming from transaction cost economics theory. Dekker thereby differentiates between formal controls and the role of trust. The second framework, by Zeng (2003), describes what drives the cooperative dilemma in joint ventures and is based on game theory. The model developed in this paper substitutes Zeng’s cooperative dilemma for one of the control problems in Dekker’s framework. The model is tested in a case study; it appears that the extension with game theory helps explain the control mechanisms in the joint venture in more detail.

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