This research provides an option-based model of dynamic foreign investment-mode choice (acquisitions vs. joint ventures) and its implication on the value of the investing firm. The model suggests that joint ventures can serve as both credible signal of commitment and call option to expand in the future in foreign markets where the firm has limited information, thereby maxmuzmg the va1ue of the investing firm. Outright acquisitions of the partners share of joint ventures or of a target firm tend to be the value-maximizing investment mode when the firm invests in the markets where the firm has learned fast enough from its operating experience. This suggests that while both joint ventures and acquisitions may create synergistic va1ue to firms, there are non-trivial differences between the two mechanisms.

• 조명현 | Myeong Hyeon Cho