Joint Ventures as an Internationalisation Strategy for SMEs

For some time believed to be inferior to Wholly Foreign-Owned Enterprises, Joint Ventures have become a popular vehicle for foreign market servicing. Although there are various proponents of the joint venture strategy as a means of enabling SMEs with limited productive resources and/or market knowledge to enter international markets, relatively few have focused on the actual joint venturing activities of SMEs. This article examines the activities of 9 U.K. and 12 German SMEs that have joint ventures in China. Based on a questionnaire survey and in-depth case interviews, it reveals that the initiatives appear to have been successful but that they are not without their problems and in many ways the experiences of the firms involved seem similar to those of the large multi-national enterprises. It argues that the key to success appears to be the choice of the joint venture partner and concludes that, given the limited resources of small firms, assistance is required to help them locate and select appropriate partners.     

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.     

The Internet,Strategy and Performance: A Study of Australian Export Market Ventures

ABSTRACT

This study examines the impact of the Internet, firm-specific characteristics, market characteristics, and export marketing strategy on export marketing performance. The unit of analysis was an individual product/market export venture. Data were gathered via a self-administered mail survey of 315 Australian firms involved in exporting. The findings indicate that, when the Internet was used for communication purposes and to provide the firm with a competitive advantage, it had a significant impact on export marketing performance. Firm-specific characteristics and export marketing strategy also had a significant impact on export marketing performance.     

Russian Telecommunication Company MTS Goes to the CIS

SUMMARY

The article deals with the outward internationalization of Russia's telecommunication company Mobile TeleSystems (MTS). This research investigates both target foreign markets and entry strategies of the company. In 2002, MTS started with entries to Belarus and Ukraine, followed by expanding to Uzbekistan and Turkmenistan in 2004. The choice of CIS countries was determined by knowledge of business environment and practices which are similar to Russia, and by economic and political ties inherited from the past. The basic strategy was acquisition of local mobile operators with the exception of Belarus where a joint venture was established. The article suggests that new market entries are expected.     

Strategic Interactions,Bargaining Power and Stability of Joint Venture in an Emerging Nation

We model strategic interaction between a domestic firm and a foreign firm involved in a joint venture, incorporating negotiations over equity shares and its implications for stability in the context of an emerging country. The foreign firm has superior technology, whereas the domestic firm has better local market knowledge. Modelling simultaneous innovation effort and bargaining power over equity share, we provide a rationale for the stability of the joint venture. We find that a certain level of technological knowledge can empower the bargaining power under certain parameter configurations and assumptions, such that the firms will negotiate to agree over their equity shares and maintain the joint venture. In this context, the stability of the joint venture is always an expected outcome. We have also shown that the domestic firm’s bargaining power and knowledge acquisition directly affect the domestic firm’s R&D effort and threaten the stability of the JV. We try to justify a probable situation where the firms may negotiate hard over equity shares but still maintain the joint venture.

     

International Catalog Mix Adaptation

Abstract

Striking the right balance of adaptation of the international catalog mix may be the key to profitability. U.S. catalog firms, new to international markets, have less experience in adapting than firms in more globalized industries. The literature on international marketing strategy adaptation reveals that this decision depends on the environment, industry, market, product, and characteristics of the firm. This paper examines the influence of market similarity, type of business and the firm's international experience on international catalog adaptation, and explores the effects of catalog adaptation on a firm's performance. We hypothesize that the greater the market similarity, the less likely it is that firms will adjust their catalog. We also argue than adaptation is greater for consumer catalogs than for business-to-business catalogs. A third hypothesis is that more internationally experienced firms will adapt more and a final hypothesis is that a greater degree of adaptation will increase the international catalog performance. The results did not support the association of international catalog adjustment and market similarity, experience, and type of catalog. Findings are mixed both on catalog adaptations and firm performance. We found that some but not all adaptations in the catalog lead to improved performance. We speculate that U.S. catalog firms are making adaptations to reduce the costs of international marketing operations. This cost reduction strategy may not necessarily lead to profitability, thereby discouraging other firms from entering international markets.     

Paths of the least resistance: understanding how motives form in international retail joint venturing

Developing the premise that strategies are forged through an ongoing mutual process of developing motives and responses to multiple degrees of resistance, this paper examines the motives underpinning the adoption of joint venture strategies using empirical details from four British retail firms. The findings point to multiple motives forming from multiple paths of resistance in the foreign market, but also among individuals within the firm as well as across the whole international programme. Moreover, this study reveals a paradoxical tension between management's operational impatience to immediately ground the retail format and an overall wariness or gloomy perceptions associated with adopting an international retail joint venture. The paper therefore concludes that the motives and barriers are manifestations of the struggles involved in internationalising retail operations.     

Institutional dimensions and conflict resolution strategy in international joint ventures: An empirical examination

This study examines the impact of the host‐country institutional structures on the choice of conflict resolution strategy in the international joint venture (IJV). Using the survey method and relying on multiple regression, we demonstrate that there is a statistically significant relationship between institutional pillars and the choice of conflict resolution strategy in the international joint venture in the context of Ghana. In particular, we demonstrate that legalistic and forcing conflict resolution strategies are influenced by the regulative institutional pillar, while compromising and problem‐solving conflict resolution strategies are impacted by normative and cognitive institutional pillars. The multigrouping analysis results show that the views and the choice of foreign partners on conflict resolution strategy differ from that of the local partners to the IJV. This study fills the gap by empirically testing the conflict resolution strategies of firms in relation to the role of regulative, normative, and cognitive institutional pillars of the host country.     

The overestimated role of strategic orientations for international performance in smaller firms

This article examines how market orientation (MO) and entrepreneurial orientation (EO) relate to international performance in small firms. Empirically, the article draws on survey data from 188 Swedish SMEs. Results show that strategic orientations have a very limited influence on international performance in these firms. Proactiveness and, to some extent, a market orientation proved positively associated with international performance, while innovativeness and risk taking show no such relationship. Our findings highlight the problems associated with using “traditional” MO and EO constructs in an SME setting and point to the need of developing more appropriate constructs tailored to this context. We also note that the MO construct was developed from a “causal view” of marketing, while successful small international firms rely more on effectuation logic. The article also contributes to the debate between the two dominant perspectives that address firms’ early internationalization processes: the process theory of internationalization and the international new venture perspective, where our results are in favor of the latter.

New directions for international retail joint venture research

Abstract

This paper contends that a range of questions arising from the geographical and organizational dynamics of international retail joint ventures have been bypassed by studies in the international retail field. It argues that, despite its importance as a corporate growth strategy, comparatively less is known about the way in which retailers have employed joint ventures in international markets. Based on a review of the literature and illustrated with examples of international retail joint venturing activity, this paper reveals several gaps in our understanding of the internationalization process of retail firms. Suggestions for further research are made throughout the paper on the basis of gaps in the retailer internationalization literature.     

International versus domestic entrepreneurship: New venture strategic behavior and industry structure

International entrepreneurship is defined in this study as the development of international new ventures or start-ups that, from their inception, engage in international business, thus viewing their operating domain as international from the initial stages of the firm's operation.One hundred and eighty-eight new venture firms in the computer and communications equipment manufacturing industries are classified according to the percentage of their sales in the international market. Ventures with no sales derived from international activities are considered “domestic” new ventures, and ventures with sales from international activities comprising greater than 5% of total sales are considered “international” new ventures.The strategy and industry structure profiles of international new ventures are significantly different from domestic new ventures. The internationals pursue much broader market-based strategies, seeking a strategy of broad market coverage through developing and controlling numerous distribution channels, serving numerous customers in diverse market segments, and developing high market or product visibility. The internationals also emphasize a more aggressive entry strategy, building on outside financial and production resources to enter numerous geographical markets on a large scale. Securing patent technology is also an important component of their strategy. This suggests that the internationals compete by entering the industry on a large scale, seeking to penetrate multiple markets, with the recognition that external resources are necessary to support such an entry.Whereas both the domestics and the internationals characterize domestic competition as being relatively intense, the international new ventures compete in industries with higher levels of international competition. It is not clear from this research whether the new venture selects an industry with a high degree of international competition and therefore responds with an international orientation or, because the new venture has an international orientation, it perceives or recognizes a higher degree of international competition. Another industry structure difference is the internationals' perceived higher degree of restrictiveness due to government regulation. It is unclear whether this restrictiveness motivates new ventures to seek less-regulated international environments or if it indicates that when competing internationally, the new venture is confronted with increased regulatory requirements.Domestic new ventures are distinguished by their emphasis on a production expansion strategy and customer specialization strategy. The production specialization strategy consists of focusing on limited geographical markets, maintaining excess capacity, and pursuing forward integration. The customer specialization strategy incorporates the production of a specialty product that is purchased infrequently. Thus, for both of the domestic strategies, a consistent “closeness” between the producer and consumer is implied. This may be an important basis underlining the new venture's decision to compete in an exclusive domestic context.This study offers initial support for the notion of international entrepreneurship by its findings that there are significant differences between new venture firms competing domestically and new ventures choosing to also enter international markets.     

Joint ventures in patent contests with spillovers and the role of strategic budgeting

We consider an R&D contest between n firms in the presence of external spillovers. Our analysis focuses on the effects of these spillovers on joint venture activities between firms. In particular, we are interested in how different budget responsibilities within the research joint venture (RJV) affect profits of firms taking part in the joint venture and profits of their non-cooperating rival firms. Three arrangements for RJVs are analyzed: First, cooperation, in which the firms participating in the joint venture completely share the research they create in the innovation process and each firm has a sovereign budget responsibility. Second, a collusive arrangement in which the participating firms not only share their research but have joint budget responsibilities in the sense that they make all strategic choices cooperatively and maximize joint profits. Third, a hierarchical form, in which the cooperating firms establish joint headquarters which have strategic budget responsibility in the sense that it can strategically subsidize R&D efforts of its member firms so as to maximize overall RJV profits. We show that the first two arrangements can be mimiced in the hierarchical structure and that a hierarchical structure is optimal if it completely subsidizes its members’ R&D activities. In this case all rival firms are driven out of the contest.     

An Investigation on Incentive Strategies in Community Building in Business-to-Business Electronic Markets

ABSTRACT

Purpose: Community building is recognized as an important governance mechanism in business-to-business (B-to-B) electronic markets by enhancing firms’ participation in these platform markets. However, little research has been done regarding the role of incentive strategies in community building. The main purpose of this paper is to understand how to motivate merchants to participate in a merchant community with incentive strategies.

Methodology: Data were collected in a community of a large B-to-B electronic platform market in China. We randomly chose a sample of 605 participants from among all merchant firms registered in this community, and track their behaviors for 2 weeks. Their behaviors are recorded based on our research design.

Findings: With the empirical analysis from a community of a large B-to-B electronic platform market in China, our results show that (1) both platform and peer incentive strategies can significantly enhance community participation, while platform incentives is more effective in general; (2) platform incentive strategy is a more effective strategy as seller firm uncertainty increases; (3) peer incentive strategy is a more effective strategy as buyer firm uncertainty increases.

Originality: This paper is among the first to investigate two types of incentive strategies in community building, platform level and peer level. We also investigate the moderating role of market uncertainties due to market participants from seller and buyer when examining the effectiveness of these two incentive strategies.     

The structure of the investment networks of venture capital firms

Venture capital firms are linked together in a network by their joint investments in portfolio companies. Through connections in that network, they exchange resources with one another. The most important of those resources are the opportunity to invest in a portfolio company (good investment prospects are always scarce), the spreading of financial risk, and the sharing of knowledge. All venture capitalists operate in very uncertain environments, none more so than the one confronting high innovative venture capitalists, HIVCs,¹ that specialize in investing in high innovative technology companies. The most uncertain of all their investments is a high-technology start-up with nothing more than a product in the head of the founder. There is uncertainty about the talent of the entrepreneur, the market need for the product, the development of a saleable product, the raising of second-round financing for working capital and expansion; the manufacturing of the product, competitors' responses, and government policies such as capital gains tax and ERISA rules, to name some of the major components. It is a formidable list. Indeed, it is hard to name a segment of any other industry that bears more uncertainty than HIVCs.A venture capital firm copes with uncertainty by gathering information. This research shows that the amount of coinvesting by a firm depends on the degree of uncertainty it faces. The greater the uncertainty, the greater the degree of coinvesting.By examining how venture capital firms were connected by their joint investments, it was found that the top 21 HIVCs comprise a tightly coupled network. And of that group, none is more tightly bound than the nine HIVCs located in California. In contrast, the group of top 21 firms that invest mainly in low innovative technology companies, LIVCs, is more loosely bound. HIVCs are more tightly bound together because they shoulder more uncertainty and therefore have a greater need to share information with one another.The practical implications of this study are as follows: Venture Capitalists. It is vital to be well-connected to other venture capital firms. They are important sources of information and investment opportunities. For HIVCs, the California group is central in the network, so links to them are valuable. Communications in a tightly coupled system are swift, so it is likely that information is disseminated very quickly among members of the group. It probably facilitates the setting of a market rate for venture capital. A disadvantage of a tightly bound system is that information flowing among the members has a redundancy and sameness about it, so to ensure a supply of fresh information, members should have as many links as possible to other organizations and individuals besides venture capitalists. Entrepreneurs. When entrepreneurs submit a proposal for funding to venture capital firms, they can assume that news will spread fast to other firms. Thus, they should not use a bird-shot approach; rather, they should select their targets with rifle precision. The proposal should be submitted to a few firms that are known to specialize in the type of product or service that the entrepreneur is planning to make. Entrepreneurs should be concerned about more than the price of the deal. When the top 61 firms invest in a portfolio company, they bring information, contacts, and “deep pockets” to the companies in which they invest. Those factors are significant in nurturing a growing company. Policy Makers. The networks of HIVCs and UVCs are quite different. The HIVCs cluster around oases of high-technology entrepreneurship in the northeast and California, whereas the LIVCs are more evenly spread throughout the U.S.A. HIVCs are located almost exclusively in the so-called “bi-coastal regions of prosperity.”This study found cliques among the venture capital firms. But it found no evidence that the top 61 firms exclude other venture capital firms from their coinvestments of first-rounds of capital. More research is needed before conclusions can be drawn about the power and influence of the top firms. Researchers. In a recent article, Granovetter (1985) suggests that if we are to explain economic behavior, we must understand the networks in which transactions are embedded. This research shows that the networks formed by the syndicated coinvestments of venture capital firms may help us to explain their behavior. A general model for coinvestment networks that is developed in this article is applicable to analysis of syndicated coinvestments not only of venture capital firms, but of investors and lenders in general.     

Are we on the same page?: Justice agreement in international joint ventures

This study examines the organizational and personal level conditions under which boundary spanners in an international joint venture (IJV) tend to disagree with each other regarding procedural justice. Nested within the logic of boundary spanning and building on the integrated justice theory and joint venture theory, this study develops an overarching framework explaining organizational- and individual-level factors impacting the level of disagreement. Our analysis of 182 IJVs in a large emerging market suggests that such disagreement increases with objective gap, ownership asymmetry, and environmental uncertainty but decreases with mutual familiarity between cross-cultural partner firms. Disagreement is also reduced when boundary spanners have more experience in managing IJVs and a longer period working together.     

Direct foreign investment in japan as a means of market entry: The case of European firms 1

Japan, one of the world's largest and strongest economies, attracts a tiny level of inward direct investment. This neglect is particularly true of European multinationals. This article examines a sample of European companies which have Japanese manufacturing affiliates, to assess direct investment as a means of access to the Japanese market. It examines the objectives and strategies of entry and evaluates the outcome in terms of successful penetration of the Japanese market. The joint venture route is a preferred means of initial entry and the research allows evaluation of the advantages and disadvantages of this mode of entry to the Japanese market.     

Russian Gas and Oil Giants Conquer Markets in the West

Abstract

Russian firms are not integrated to the global business world solely via investments from the West to the East but also through investments from Russia to other countries. This article proves that some significant Russian corporations have already taken root in Western economies, including the US market. The first wave of the Russian companies in the West increases the pressure to analyze them as potential partners or competitors. This article uses a REM model to describe the foreign operations of the two biggest Russian corporations, Gazprom and LUKoil. The fast-expanding activities of Russian firms abroad signify that a new era in international business has begun on the eve of this millennium.     

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.     

Corporate ventures into industrial markets: Dynamics of aggressive entry

This article reports a study of the effect of aggressive entry by firms venturing into new industrial markets. There are three main sets of results:First, there is a significant correlation between the competitive attractiveness of the target industry and the initial share objective set by the corporation venturing into that industry.Second, the downstream share objective, set at the launch of the venture is significantly correlated with several key marketing strategy and investment strategy options made by the firm at the start of operations.Third, if most of these key strategy decisions are made under the assumption that a high share position will rapidly be achieved, their resulting performance, in terms of both market share and ROI, is superior to firms which enter with less aggressive share aspirations.These results are particularly appealing to the large established firm which has the resources and thus can both afford to absorb the cost of failure and afford to make significant front-end investments in aggressive initial marketing expenses and investments in initial plant capacity. For such firms a feasible strategy for a new venture into an industrial market could be to: if possible (but not essential) seek industries/markets to enter which are less likely to provoke rivalrous responses; set aggressive market share targets; invest aggressively in initial plant capacity; develop aggressive sales force, sales promotion, advertising, service quality, and/or pricing programs relative to competitors, as appropriate to the particular industry being entered.The reason we suggest that the programs be aggressive as appropriate is that different strategic options are likely to be more effective in one industry than another. For instance, aggressive advertising and sales promotions could be more effective for consumables, while aggressive sales calling programs and superior service delivery could be the more effective route for capital goods businesses.