Expropriation of intellectual capital: Evidence from joint ventures

This study examines the potential for expropriation of a firm's intellectual capital that is exposed when it enters a joint venture agreement. My findings include the following: (1) firms whose partner in a joint venture is the target of a takeover (i.e., the non-targeted partner) often suffer a loss in value; (2) the magnitude of the loss increases with the R&D intensity of the non-targeted joint venture partner; and (3) the losses sustained by acquirers are reduced when they share a common business with the joint venture partners and the non-targeted partner is R&D intensive. I conclude that joint ventures appear to act as a conduit through which a partnering firm's intellectual capital can be lost or expropriated.