AGENCY COSTS AND THE PERFORMANCE IMPLICATIONS OF INTERNATIONAL JOINT VENTURE INTERNALIZATION

Recent studies have examined the determinants of international joint venture (IJV) formations and stock market reactions to such investments. Less is known, however, about the evolution of IJVs and the attendant performance implications for parent firms. This paper examines one specific type of IJV evolution, IJV internalization, whereby one firm acquires the IJV by buying out its partner(s). Standard agency theory variables are hypothesized to influence parent firm valuation effects. The results indicate that parent firm valuation effects are positively related to the parent firm equity owned by insiders and the interaction of debt financing and free cash flow. © 1997 by John Wiley & Sons, Ltd.     

Perceived fairness,decision control,and commitment in international joint venture management teams

Previous research examining the effectiveness of international joint ventures (IJVs) has focused on differences in the backgrounds and bargaining power of IJV parent firms, while little attention has been given to the IJV itself. This study takes a different perspective by examining the relationship between IJV parent firms and the IJV. Specifically, we examine how IJV and parent involvement in strategic decision‐making influences the IJV management team's commitment to the IJV and to the parent firms. We hypothesize that the IJV management team tends to be more committed to the IJV than to the parent firms, and that there is a strong positive relationship between procedural justice, strategic decision control, and organizational commitment. A field study involving 51 IJVs supported our hypotheses. We discuss the implications of organizational commitment and procedural justice for managing IJVs. Copyright © 2002 John Wiley & Sons, Ltd.     

Product diversification in international joint ventures: performance implications in an emerging market

This study extends product diversification research to a new organizational form (IJV) and a new environmental context (emerging market). It explores the extent to which product relatedness with both foreign and local parents affects IJV performance as perceived by venture managers. After controlling for relevant variables, analysis of the data containing 134 IJVs in China validates our major premise: the relatedness of an IJV's products with that of its foreign and local parents is positively associated with its performance. An IJV maintaining bilateral related diversification (i.e., with both parents) performs better than a venture maintaining a unilateral related linkage (i.e., with one parent), which in turn outperforms an IJV which is unrelated to either parent. When resource complementarity or goal congruity between parents is higher, there is a stronger positive relationship between product relatedness and IJV performance. When structural opportunities are fewer or institutional deterrence is higher, there is a weaker positive relationship between product relatedness and IJV performance. Copyright © 2002 John Wiley & Sons, Ltd.     

Explaining IJV survival in a transitional economy through social exchange and knowledge‐based perspectives

In this study, we combine social exchange and knowledge‐based perspectives to develop a general path model of IJV survival. We further refine our expectations by considering the transitional economic context of our study and the somewhat unique managerial values resulting from the legacy of Marxist ideology. Results from structural equation modeling suggest that an imbalance in the management control structure between the parents leads to parental conflict and an increased likelihood of IJV failure. An imbalance in the ownership control structure, however, had no influence on conflict or survival. In general, support from the foreign parent is positively related to IJV learning and IJV survival. However, higher levels of technical support provided by the foreign parent to the IJV reduced the level of parental conflict, whereas management support had no effect on conflict. Our results suggest some dilemmas for firms pursuing IJVs in transitional economies. Although the foreign parent often contributes critical resources to the IJV, providing it with bargaining power and a high level of influence, an imbalance in management control between the partners may ultimately be detrimental to IJV survival. Copyright © 2000 John Wiley & Sons, Ltd.     

伙伴间依赖与国际合资企业的不稳定性研究

基于动态演化的视角,开发了一个有关国际合资企业（IJVs）伙伴间依赖的影响因素和结果的综合概念模型。认为,在IJV发展演化的不同阶段,影响伙伴间依赖的因素不同。在IJV形成阶段,母公司投入的资源、基于情境的IJV伙伴间的讨价还价力是影响伙伴间依赖的主要因素;在IJV形成后到终结这一阶段,伙伴间的相互学习是影响IJV伙伴间依赖的主要因素。伙伴间依赖与IJV不稳定性之间的关系随着依赖程度的变化而定。除此之外,伙伴间的依赖与伙伴间的信任交互作用,共同影响着IJV的稳定性。而伙伴间冲突则对IJV的稳定性产生着直接的、负向的影响。在阐述这些关系的基础上还提出了一些反映这些关系的命题,以期为未来的实证检验做好铺垫。     

Antecedents and performance consequences of learning success in international joint ventures

This study examined a sample of organizations involved in international joint ventures, (IJVs) in Malaysia. Drawing upon the resource based view of the firm this paper investigates the antecedents and performance consequences of learning success of foreign partners in IJVs. Data was analysed using two-stage least squares regression (2SLS). Results suggest that a learning orientation, IJV partner mutual dependency and management control, have a positive effect upon the learning success. Results also suggest that organizations with higher levels of learning orientation and learning success have higher levels of business performance. The findings imply that foreign partners in IJVs that are successful in achieving their learning goals, and improving their knowledge, will be winners in terms of improving their business performance.     

Anxiety of dependency in international joint ventures? An empirical study of drivers and consequences of relationship insecurity

This research introduces and delineates the concept of insecurity in IJV relationships. We define relationship insecurity as a parent firm's concerns about the continuance of the alliance arrangement and its partner's future provision of need satisfaction. According to interdependence theory, exchange partners that experience high dependence inevitably experience this ‘anxiety of dependency’, and the emergence of insecurity can destabilize the working relationship from within. We develop a conceptual model of the drivers and consequences of relationship insecurity in IJVs. Our survey results from 125 IJVs indicate that focal firm dependence and partner firm dependence both negatively affect insecurity, though the former is the dominant predictor. This surprising finding implies IJV partners experience ‘anxiety of low dependency’. The results suggest insecurity not only reduces directly IJV performance, but also lowers the quality of interpartner communication, which in turn dampens performance. Implications of these results are discussed.     

Standardization and Localization of Human Resource Management in Sino-Foreign Joint Ventures

The international human resource management models developed in the last decade pursue a contextual analysis of the standardization (global integration) of multinational parent companies' human resource management policies and practices and localization (local differentiation) of host countries' practices. This paper extends existing international human resource management models by exploring the characteristics of IJV partners, and their ability to influence whether the IJV adopts standardised or localised HR practices. The hypothesized strategic drivers for the formation of HR policies and practices in IJVs are HR expertise, HR consistency, resource power, and internationalisation experience.     

Understanding firms’ relative strategic emphases: An entrepreneurial orientation explanation

Top management’s choices regarding strategic emphases (e.g., value-creation versus value-appropriation) are an important component of firms’ success. While extant research has explored the effects of strategic emphasis on firm performance, few studies have examined the factors that affect top management’s strategic emphasis choices. The study addresses this gap by examining the relationship between management’s entrepreneurial orientation and its relative strategic emphasis on value-creation versus value-appropriation. In addition, it investigates the moderating roles of relative performance, compensation strategy, and capital market patience, on the above relationship. Using a multi-source dataset of 337 Standard & Poor (S&P) 500 companies from 2007-2015, we find that entrepreneurially oriented managers tend to focus more on value-creation (e.g., new product development) over value-appropriation (e.g., advertising), but this influence is contingent on, at least, three factors: (1) relative firm performance, (2) compensation strategy, and (3) capital market patience. The study provides a broad theoretical foundation that explicates key factors that influence firms’ resource allocation decisions.     

External COO/presidents as expert directors: A new look at the service role of boards

Much of the scholarship on boards of directors has examined either the control (i.e., monitoring) role or the resource dependence role that boards fill. Relatively little has examined the service role, wherein directors provide advice and guidance to management. This study builds on recent work exploring director expertise by asking how operational expertise on boards impacts firm performance. We find that having external COO/presidents on a board of directors positively impacts firm performance when the firm's operational efficiency is declining, but negatively impacts performance when the firm's operational efficiency is improving. We also find that other types of external executives serving as directors exhibit the opposite relationship, suggesting that the value of director expertise is context‐dependent. We discuss the implications of these findings for director selection. Copyright © 2013 John Wiley & Sons, Ltd.     

Family ownership and firm performance: Influence of family management,family control,and firm size

This study examines the relationship between family ownership and firm performance by considering the influence of family management, family control, and firm size. Using proxy data of 786 public family firms in Taiwan during 2002–2007, this study found that family ownership is positively associated with firm performance. The positive association is strong particularly when family members serve as CEOs, top managers, chairpersons, or directors of the firms; however, the association becomes weak when family members are not involved in firm management or control. The findings suggest that the potential family-ownership effects are more likely to be realized when family ownership is combined with active family management and control. In addition, the association between family ownership and firm performance is stronger in small- and medium-sized enterprises (SMEs) than in large companies.     

Standardization Alliance Networks,Standard-Setting Influence,and New Product Outcomes*

Standardization alliances evolve through collaborations among firms for developing and implementing industry technical standards. Cooperative standard setting can help allied firms to gain access to external knowledge and technologies, but it is unclear how the configuration of a standardization alliance can result in improving a firm’s performance in new product development. This study examines how standardization alliance network-based resource advantages vary across a firm’s network position and the firm’s ability to influence industry standard setting and new product outcomes. Empirical analyses, based on archival data from 170 Chinese automobile manufacturers from 1999 to 2013, indicate that firms that span structural holes in standardization alliance networks gain an advantage when focusing on early new product introductions but suffer a disadvantage when aiming at more innovative products. In contrast, taking a central position in standardization alliance networks is negatively related to a firm’s speed in bringing new products to market but positively related to the firm’s new product introduction rate. Further, standard-setting influence significantly mediates the effect of network position on a firm’s new product speed to market. Increasing centrality and structural holes can lead to the improvement of a firm’s standard-setting influence, and this, in turn, positively affects speed to market.     

The effect of upper echelons’ compensation on firm internationalization

This paper is built upon previous work concerning how three factors—an upper echelon’s compensation, the total compensation level of a chief executive officer (CEO), and compensation gaps between a CEO and a top management team (TMT)—affect a firm’s international expansion level. Using longitudinal data (2000–2005) from 528 publicly listed firms in Taiwan as our sample, we found that CEO total compensation level and TMT total compensation were positively related to firms’ international expansion level, and that the larger the compensation gap between CEO and TMT, the higher the given firm’s international expansion level. The implications that these findings have for future research are discussed.     

Cluster and performance in foreign firms: The role of resources, knowledge, and trust

Clustering, the grouping of firms in close geographic proximity to one another, can enhance the performance of affiliated firms by providing access to complementary resources. Despite that some studies have produced empirical evidence supporting the positive impact of clustering, other studies have found no such evidence. Consequently, the consideration of clustering alone to explain differences in firm performance may be insufficient. This study seeks to determine whether the enhancement of firm performance comes as a consequence of clustering at the location level, interorganizational trust at the relationship level, or resource and knowledge management (i.e., the mechanisms of system dependence) at the firm level. Examining a sample group of Taiwanese manufacturers investing in China, we find that interorganizational trust, resources, and the mechanisms of system dependence all have a positive impact on performance. Further, we find that resources interact with clustering to positively impact firm performance.     

Application and performance impact of stage–gate systems – the role services in the firm’s business focus

Although service innovation is important, knowledge of new product and service development, including the positive effect of stage‐and‐gate‐type systems, has been derived almost exclusively from studies in the manufacturing sector. In the present paper, we address two important questions: How do differences in the firm’s business focus, which describes whether a firm puts more emphasis on products or services in its business activities, influence the usage of such formal innovation processes? Is stage‐and‐gate‐type systems’ impact on innovation program performance contingent on the firm’s business focus? Unlike previous studies, we not only differentiate service and manufacturing by industry classification codes but also apply a continuous measure to take into account the blurring of boundaries between the manufacturing and service businesses. Based on a comprehensive discussion of service‐specific characteristics and their implications for innovation management and using a cross‐industry, multi‐informant sample of innovation programs from 272 firms with 1,985 informants, we find empirical support for firms with a stronger focus on the service business being less likely to use stage‐and‐gate‐type systems. Furthermore, the use of stage‐and‐gate‐type systems fosters innovation program performance, and this effect becomes stronger as the business focus shifts toward services. This result implies that service‐based firms can benefit from stage‐and‐gate‐type systems to a greater extent than product‐based firms. Our research also demonstrates the gap between the desired level of innovation process formalization and its current usage in practice, especially for firms with a dominating service business.     

Knowledge‐based resources,entrepreneurial orientation,and the performance of small and medium‐sized businesses

While theory suggests that management has discretion in manipulating resources in order to build competitive advantage, resource‐based research has focused on the characteristics of resources, paying less attention to the relationship between those resources and the way firms are organized. In explaining performance, entrepreneurship scholars have focused on a firm's entrepreneurial strategic orientation (EO), leaving its interrelationship with internal characteristics aside. We argue that EO captures an important aspect of the way a firm is organized. Our findings suggest that knowledge‐based resources (applicable to discovery and exploitation of opportunities) are positively related to firm performance and that EO enhances this relationship. Copyright © 2003 John Wiley & Sons, Ltd.     

The influence of intellectual capital on organizational performance—Knowledge management as moderator

The main objective of this study is to explain the global performance of firms from an intellectual capital perspective. Samples were selected from a list of the top 1,000 Taiwanese companies using a type of purposive sampling. The selection criteria required sample companies to be located in Taiwan and to compete globally. This study collected 146 valid questionnaires from 146 companies. The results confirm that intellectual capital is positively associated with a firm’s global performance. The results also confirm a moderating effect of knowledge management strategy on the relationship between intellectual capital and global performance. These results imply that a combination of the right type of knowledge management strategy with the right form of intellectual capital will enhance a firm’s performance, although neither the technology-centered nor the people-centered approach should be overused.     

The Impact of Innovative Culture on Individual Employees: The Moderating Role of Market Information Sharing

Current innovation literature provides a very limited understanding of the potential impacts of innovative culture on employees. Building on resource‐based view theory, the authors investigate theoretically and empirically how a perceived innovative culture can be a building block for a firm's competitive resource and advantage by creating superior employee‐level outcomes and how a market information‐sharing process may moderate these effects. The authors identify three distinct types of individual‐level outcomes stemming from an innovative culture. The three outcome variables—job satisfaction, organizational dynamism perception, and firm performance perception—reflect employees’ psychological and cognitive reactions to the process of creating organizational innovation and innovative culture. The authors collect survey data from 3960 individual employees in China. Their findings first show that a perceived innovative culture significantly and positively affects employees’ job satisfaction and perceptions of organizational dynamism and firm performance. Moreover, organizational dynamism perception plays an important mediating role among three employee‐level outcomes by converting job satisfaction into firm performance perception. The authors also find support for the direct, positive effect of a perceived market information‐sharing process on job satisfaction but not on perceptions of organizational dynamism and firm performance. Most importantly, their findings on the significant moderating role of a market information‐sharing system contribute to innovation theory by emphasizing the importance of the innovation/marketing interface: bundling market information sharing and innovative culture together enhances employees’ positive attitudes and perceptions. This result also suggests that examining only the direct effects of innovative culture and market information sharing may lead to incorrect conclusions as to how to manage the cultural infusion process: the market information‐sharing process shows only a weak effect on job satisfaction and no effect on perceptions of organizational dynamism or firm performance. Organizational designs should ensure simultaneous consideration of both variables in the cultural transformation process to enhance employees’ derived benefits in the process of creating an innovative culture. We offer a new insight: a perceived market information‐sharing process may strengthen the effect of an innovative culture on employees’ job satisfaction and organizational dynamism perception, while it may weaken the effect of an innovative culture on firm performance perception. This more nuanced view of market information sharing in the cultural infusion process presents new wisdom and calls for further studies in entrepreneurial innovation.     

Compositional gaps and downward spirals in international joint venture management groups

We argue that compositional gaps in international joint venture (IJV) management groups, along parent company lines, will accentuate distinct managerial coalitions. Such gaps can occur on dimensions of observable demography, less apparent demography, or psychological characteristics. While compositional gaps in IJV management groups can provide the basis for healthy substantive conflict, such gaps—particularly if they are large—also tend to induce relationship conflict and heighten substantive conflict beyond its beneficial range. This can set off a downward spiral of relationship conflict, substantive conflict, and behavioral disintegration in the group. These harmful group processes further interact reciprocally with any tensions that might exist between the IJV parents, engendering a second downward spiral. Our model has implications for the performance of international joint ventures, and it serves as a foundation for designing interventions to avoid the downward spirals we portray. Copyright © 2001 John Wiley & Sons, Ltd.     

Parent contribution and organizational control in international joint ventures

Organizational control scholars have recently noted how control use is not singular in organizations, but rather, different types of control are used to achieve different purposes. In international joint ventures (IJVs), we suggest that output, process, and social control are exercised by both foreign and local parent firms. We then hypothesize that a parent firm's usage of these three control types is influenced by its resource contributions. Using a sample of IJVs in China, we find that property‐based contribution is linked with output and process control, and knowledge‐based contribution is related to process and social control. The results also show differences in control practices between foreign and local parent firms. The findings provide important implications for the design and implementation of control systems in IJVs.