9314266 Lane The extraordinary increase of joint ventures and small-firm start-ups in Eastern Europe and the former Soviet Union suggests that these mechanisms make an important contribution to long-run economic transformation. This Research Planning Grant (RPG) develops an empirical research program that addresses the following questions: What factors have contributed to the rapid increase in joint ventures? What can we learn about the formation and management of joint ventures from this large sample? Have countries and firms benefitted from cooperation and the capital, managerial expertise, and production technology invested? Finally, how does the sectoral distribution of joint ventures compare to that of new business starts? The focus of the research is on joint ventures because availability of data is better and the findings are more generalizable to market economies. The sectoral incidence of joint ventures can be measured by the number of joint ventures or by the amount of foreign capital invested. Independent variables test the relative importance of strategic factors, technological factors, and specific Eastern European factors such as filling in the gaps in industry distribution that are the legacy of central planning. Though joint ventures have increased significantly in Western economies, this increase is dwarfed by the increase in the joint ventures between Western and Eastern European firms. The large number and variety of joint ventures provides a unique opportunity to test three important elements that influence the organizational structure of a firm: technology (demand and cost complementarities), limitations on contracts caused by idiosyncratic assets, and incomplete contracts as a result of the inability to contract for all contingencies. The RPG will develop further the survey data, initial analysis of the data, and collaboration with Hungarian researchers to prepare a more extensive proposal to evaluate the benefits to the firms of und ertaking joint ventures. Future research using actual case studies will be a collaborative process between the principal investigator and Hungarian researchers with contacts and expertise in fieldwork. ***
