Valuation effect of international joint ventures: does experience matter?

This article investigates the relationship between accumulation of different types of experience (managerial and geographical) by companies involved in international joint ventures and shareholder value creation. From an event study methodology, cumulated abnormal returns (CARs), used as a proxy of shareholder value creation, are estimated for a sample of 67 French partners that announced the formation of joint ventures in China during a period ranging from January 1994 to December 2002. The results show that the valuation effect of experience has to be distinguished according to the type (managerial or geographical) of experience analyzed: French companies entering into joint ventures in China create more value as they accumulate alliance experience (experience in setting up and managing Sino-French Joint ventures) or international experience, whereas there is no evidence that these companies create more or less value as they accumulate Asian experience.