This study investigates factors that influence the termination of an international joint venture (IJV) and examines how the resulting wholly owned subsidiary’s (WOS) proximity to its previous partner can promote cluster formation in an emerging economy. The author uses a game-theoretic approach with complete information to demonstrate how the post-IJV cluster formation process is based on the cluster type to be formed—symmetrical or asymmetrical. The author also describes conditions under which government subsidies may be necessary to encourage the IJV termination and WOS formation to support cluster formation, as well as conditions where they are not required or could be counterproductive.
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