Knowledge Complexity, Learning Capability and Joint Venture Instability

This paper applies game theory to analyze the dynamics of a joint venture. In particular, this study argues that knowledge complexity and learning capability are critical factors in determining bargaining power of both partners. Change of bargaining power breaks the balance and causes instability of a joint venture (rearrangement of control). In order to improve the stability of a joint venture, both sides need to protect their knowledge effectively, or to increase their learning capability continuously. Government as a third party of this game can also impose an important impact on stability of such partnership.