Strategic Motives and Partner Selection Criteria in International Joint Ventures in Turkey

Abstract

This paper provides an analysis of two important aspects of international joint venture (IJV) activity between Western MNEs and local partner firms in Turkey. First, the strategic motives for IJV formation are investigated from the comparative perspective of Western firms and local partners. As hypothesised a number of significant differences are found in the relative importance of strategic motives between foreign partner firms and Turkish partner firms. Second, the paper considers criteria used by Western firms and Turkish firms when selecting IJV partners. As hypothesised a number of significant differences are found in the relative importance of selection criteria between foreign partner firms and Turkish partner firms. Third, the paper considers the relationship between selection criteria and strategic motives by examining a multiple regression model using the factors of selection criteria and the factors of strategic motives as dependent and independent variables respectively. There is some support for the hypothesis that the relative importance of the selection criteria varies with the strategic motives of the IJV.     

International Strategic Alliances

Abstract

This paper reports the findings of an empirical investigation of strategic alliance agreements between UK firms and their European, Japanese and US partners. The aim of this paper is to shed some light on the international strategic alliance activity of UK firms and ascertain the objectives and motives of international strategic alliances. In addition, the perceived performance of the strategic alliance is considered together with the perceived level of satisfaction of a range of alliance activities. The findings should prove to be a useful guideline for researchers and practitioners engaged in understanding international strategic alliances. The analysis should allow managers to examine the important issues in the formation of international strategic alliances and allow them to understand the assessment of performance and satisfaction of the alliances formed.

Key Results: The findings have shown a definite pattern in UK international strategic alliance activity. The results of the study indicate that the majority of UK firms engage in international partnerships for marketing-related activities and are essentially driven by the financial cost and risk of entering a foreign market; access to overseas market and improving market share. The findings have also indicated that the majority of UK managers are satisfied with the overall performance of the international strategic alliance.     

Functional and contextual dimensions of INVs’ alliance partner selection

Prior research on the selection of international alliance partners calls for investigation of the potential specificity of selection criteria for evaluating partners for alliances with different objectives or functions. The present study responds to this need and contributes to the development of the field of international entrepreneurship by examining the relation between the alliance function and the criteria chosen. We studied three alliance functions: R&D, production, and marketing. Second, for each alliance function, we analyzed the criteria selected within two contexts: developing countries and those that consider emerging markets in their partner choice set. Data were collected through semi-structured interviews with 25 executives from international new ventures (INVs) in two major North American biotechnology clusters, representing 239 alliances; 65.7 % of these were signed with international partners. Results indicate that, aside from compatibility/complementarity of resources (R&D and production alliances), all criteria used within a single function are unique to that function. Furthermore, these criteria differ somewhat when the potential partners considered by a firm include those from both emerging and developed markets, compared with firms that limit potential partners to those in developed market contexts. Finally, the study reveals that respondent firms integrate country, industry, and market attractiveness factors with partner selection criteria for marketing alliances. This suggests that, for many firms, market choice and partner selection are not successive steps. The study’s originality lies in its focus on the relationship between alliance function and partner selection criteria used by INVs as well as within different contexts.     

Determining international strategic alliance performance: A multidimensional approach

This paper considers the relationship between subjective, multidimensional measures of international strategic alliance (ISA) performance and predictors of success both before the alliance is formed (pre-alliance formation factors) and during the operation of the alliance (post-alliance formation factors). The empirical study, based on a web-survey, investigates a sample of Danish partner firms engaged in 48 equity joint ventures and 70 non-equity joint ventures with partners from around the world. A multi-dimensional operationalization of alliance performance measurement is utilized in order to capture both process and outcome aspects of alliance performance. The results show a significant relationship between alliance performance and host country risk as well as partner reputation preceding alliance formation. During the operation of the alliance, relationships between collaborative know-how, trust, protectiveness, complementarity, cultural distance and alliance performance were found.     

Market and partner selection processes in international retail franchising

This paper adopts a qualitative, case study approach to examine the market and partner selection processes of retailers operating internationally via franchising. Despite the increasing prevalence of franchising as an entry mode for international retailers, little research exists that considers how these firms choose franchise markets and franchise partners. The paper proposes a conceptual framework of the market and partner selection process that exhibits opportunistic and strategic behavior. Firms adopting a strategic approach undergo a market screening process before market attractiveness factors ultimately lead to the market selection decision. In the strategic partner selection process that follows, finance, business know-how, local knowledge, a shared understanding of the business and brand, and, ultimately, chemistry between the partners are the key factors influencing partner selection. In the case of an opportunistic approach to market and partner selection, the process reverses, with partner selection directly influencing market selection.     

Strategic alliances by financial services firms

We examine a sample of strategic alliances made by financial services firms during 1986 to 2003. The market reacts positively to the announcements of alliances and seems to incorporate the information about the value of alliances at the time of alliance announcements. We find no evidence of abnormal stock performance after announcements. Our results also suggest that strategic alliances usually are used as a final form of cooperation rather than as a first step towards closer cooperation between firms. For instance, only about 5% of alliances are followed with joint ventures or mergers of partner firms. Nevertheless, strategic alliance firms are more likely to form joint ventures or merge than randomly selected and matched firms. Furthermore, the market reacts more favorably to the alliance announcements by firms that are subsequently acquired by the alliance partners.     

Partner identification and selection of joint ventures in international retailing

Identifying and selecting the ‘right partner’ is one of the key topics in the international retailing literature. Yet, current research provides little knowledge of how international retailers find and select joint venture (JV) partners in foreign markets. We investigate seven cases of British retail multinationals to address this research gap. We find that some retailers initiate formalised partner searches. In other cases, however, JVs arise opportunistically, involving no planned partner identification and selection. Retailer selection criteria revolve significantly around local relationships and market knowledge, specifically concerning local real estate. At the same time, some retailers understand that to leverage these local resources, the relationship and strategic fit with partners are critical.     

Strategic alliances by venture capital backed firms: an empirical examination

A growing body of literature examines the formation of strategic alliances as an important value-added role provided by venture capital firms. This paper contributes to this literature by examining two related questions: whether venture capital firms use strategic alliances as a substitute or compliment to capital infusion, and how venture capital firms use alliances to mitigate different types of risk. Results from 2505 venture-backed startups reveal that venture capital firms treat alliance formation as a substitute for capital infusion and that the breadth of the network of syndication partners investing in the startup increases the number of its strategic alliances. We also find intentionality in alliance formation. Specifically, firms operating in industry environments characterized by technical risk are more likely to form alliances with partners capable of mitigating technical risks, and firms operating in environments characterized by market risk are more likely to form alliances with partners capable of mitigating market risk. Our findings lend additional support to the perspective that alliances represent an important mechanism through which venture capital firms add value to their portfolio companies.     

The effect of foreign partner network embeddedness on international joint venture failure: Evidence from European firms’ investments in emerging economies

Access to trusted information about potential local partners is a critical factor for international joint venture (IJV) stability and success in emerging economies. We build on social network theory and examine how foreign investors can benefit from their alliance networks in accessing reliable information on the availability, resources, and behavior of potential local IJV partners. More specifically, we examine positional embeddedness in networks and network density and how these factors help foreign firms mitigate behavioral uncertainty in IJVs and thus reduce the likelihood of failure. We use data on 349 IJVs formed by 132 European firms in emerging economies during the 1995–1997 period and event history analysis to test our hypotheses. Our findings indicate that having an alliance network is a necessary but insufficient condition to mitigate behavioral uncertainty of local partners. We find that only densely tied networks offer benefits of reliable information on potential local partners that ensure the longevity of IJVs and that a central position in an alliance network translates into lower IJV failure.     

跨国战略联盟:对现代企业竞争关系一种新的诠释

跨国战略联盟是跨国经营企业为了实现战略目标所建立的合作关系,是企业可以扩大经营范围而不扩大企业规模的一种经营方法,作为介于市场和企业组织间的“混成组织”,跨国战略联盟体现了一种新型的“柔性”竞争,是在竞争的基础上加入了合作的内涵,是一种合作性的竞争或竞争性的合作,它对现代企业的竞争关系进行了新的诠释。     

Chinese Private Firms’ Outward Foreign Direct Investment: Does Firm Ownership and Size Matter?

This article investigates and explains the behaviors, motives, and characteristics of Chinese privately owned enterprises’ (POEs’) outward foreign direct investment (OFDI), and compares this with the behaviors, motives, and characteristics of Chinese state‐owned enterprises (SOEs), using the institutional perspective and resources‐based view. Through in‐depth interviews with senior managers and an extensive secondary data analysis of Chinese POEs’ OFDI, we found that Chinese POEs are increasingly active in committing both market‐ and strategic asset–seeking OFDI due to the unfavorable institutional environment they face in China and the different types of resources possessed. POEs cluster with their business partners or domestic peers for international market expansion and adopt several approaches to acquire strategic assets. © 2014 Wiley Periodicals, Inc.     

BOOK REVIEW

ABSTRACT

Partner selection is one of the key aspects of alliance strategy. Selection of appropriate partners can have a significant impact on the success of an alliance. In this study, we examine whether firms seek symmetric alliance partners. Symmetry is examined in respect of several criteria such as goals, management style, size, experience, power and dependence. Based on the responses of 179 Singapore managers, we find that, in most respects, firms indeed seek symmetric partners. Our results are quite robust across sub-samples consisting of firms with different performance levels in previous alliances and having varying levels of prior alliance experience.     

An examination of the investments in U.S. biotechnology firms by foreign and domestic corporate partners

This study examines the characteristics that make start-up biotechnology firms attractive alliance partners. We distinguish between firm specific and location-specific characteristics as well as between foreign and domestic corporate partners. We present and test a longitudinal model of alliance development based on data from 64 public biotechnology firms. The results provide evidence that foreign and domestic alliance capital inflows are driven by different factors. Firm-specific factors explain minimal variance in capital inflows from foreign alliance partners; rather, location-specific factors seem to matter more. The reverse is true for domestic alliance partners. Further, our results suggest that firm size moderates the relationship between location-specific factors and capital inflows from foreign alliance partners such that larger firms benefit more when located in technologically munificent environments.     

Upstream internationalization process: Roles of social capital in creating exploratory capability and market performance

This paper investigates to what extent resource governance of international ventures affects dynamic capability and market performance in the high-tech firms’ internationalization process. We examine the non-equity-based international network collaborations of high-tech firms as forms of strategic resource seeking within the internationalization process. Within the context of upstream technology collaborations by international software and hardware firms, this paper proposes and empirically examines the impact of resource governance mechanisms (i.e. trust-building and behavioral monitoring) on the exploratory capabilities of firms. The findings indicate that building trust in the internationalization process of network ventures contributes to the firm-level exploratory capabilities and, in turn, market performance. Furthermore, this paper tests the moderating effects of structural capital on the capability–performance relationship. The relationship is stronger when network relationships existed before the inception of the international technology alliance. We also find a negative moderating effect from the existence of an actual alliance and from network duration on the relationship between exploratory capability and market performance. To this end, the longevity of the alliance may not always be something firms should aim for. The paper highlights the criticality of relational and structural capital in the internationalization process and the importance of exploratory capability for creating radical innovation in high-tech industries.     

Partner Selection for International Marketing and Distribution in Corporate New Ventures

The software industry offers numerous options for a firm to arrange its international marketing activities. Although a prominent way to enter the international market is through co-operation, there is a limited amount of research regarding partner selection. The purpose of this paper is to explore how entrepreneurial corporate new ventures use partners in their international marketing. A representative case study is used to illustrate the partner selection and evaluation process in the software industry. Our findings indicate that small entrepreneurial firms can and should use partners in their internationalization. However, a more analytical approach to their selection is needed.     

Exploration and exploitation fit and performance in international strategic alliances

Exploration and exploitation constitute two separate, potentially conflicting strategic choices for firms engaged in international strategic alliances. Our empirical study challenges the ambidexterity argument and demonstrates that exploration and exploitation are separate (though not necessarily antithetical) strategies with different antecedents and performance consequences.Our results show that while competency similarity is conducive to upstream innovative performance, prior experience with the partner is potentially damaging for this type of performance and trust and cultural distance do not play significant roles. When the motive is efficiency and downstream market performance, prior experience with the partner instead is beneficial, as are high levels of trust and low levels of cultural distance. These findings have key implications for literature on strategic fit and alliance performance.     

Organizational capital,production factor resources,and relative firm size in strategic equity alliances

Access to complementary resources through strategic equity alliance networks is an important activity for both smaller and larger firms. In the literature, there is an intensive debate on the impact of alliance resources for smaller firms. We submit that the effect of alliance resources on the smaller firm financial performance depends on the attributes of these resources. Specifically, we argue that the attributes of partner organizational capital are negatively related and the attributes of partner production factor resources are positively related to the smaller firm financial performance. We test our theoretical framework by applying a longitudinal analysis to a dataset of 1730 firm-year observations of strategic equity alliances in the software industry in 25 countries over an 11-year period. We find support for our hypotheses, highlighting the critical importance of resource attributes for smaller firms in strategic equity alliance networks.     

Fitting strategy derived from strategic orientation to international contexts

The search for strategic fit within a market has become a core concept in strategy research. The issue of strategic fit is becoming increasingly important in international strategy as managers and academics explore the uniqueness of international markets. Unfortunately, during a time of open market diversity, many firms are driving toward a singular strategic orientation (i.e., market orientation), thus ignoring the underlying problems and criticisms with a standardized strategy, often resulting in suboptimal performance. A model highlighting the criteria necessary for fitting strategy to international contexts is developed. An empirical illustration is then used to examine the benefits of strategically fitting strategy to context. Finally, a process is provided to assist managers in the formation and implementation of their strategy. © 2006 Wiley Periodicals, Inc.     

International exposure through network relationships: Implications for new venture internationalization

Drawing on the network literature and attention-based view, we examine the extent to which international exposure from key informal (geographically proximate firms) and formal (alliance partners) network relationships impacts new venture internationalization. Our findings are three-fold. First, international exposure from both types of network relationships positively influence new venture internationalization, and serve as substitutes for each other. Second, the effects differ based on the age of the venture. While older ventures benefit more from international exposure from alliance partners, younger ventures are more influenced by international exposure from geographically proximate firms. Third, our analysis confirms a three-way interactive effect of age and international exposure from informal and formal relationships on new venture internationalization.