Partnering with Foreign Firms: How Do Chinese Managers View the Governance and Importance of Contracts?

It is a widespread perception that the role of contract in Chinese society is limited because obligations often derive from personal relationships. It is not clear how Chinese managers view the governance and importance of contracts when they deal with foreign counterparts in their joint ventures. To addresses this issue, this study proposes and verifies the governance structure and performance implications of interpartner contracts in a setting of international joint ventures (IJVs). Extant research on IJVs has extensively examined IJV performance but inadequately assessed how this performance is influenced by contractual design. Our analysis of 114 sample IJVs in China suggests that the governance structure of an IJV contract includes four dimensions, namely, issue inclusiveness, term specificity, contingency adaptability, and contractual obligatoriness. Each of these dimensions is validated to be important to IJV formation, interpartner cooperation, and process efficiency as perceived by Chinese managers working in IJVs.     

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.     

Control,collaboration, and productivity in international joint ventures: theory and evidence

This study analyzes the following unresolved questions: In international joint ventures (IJVs) in a developing country, how could different IJV structures address control and collaboration considerations, and what is the likely effect of such different structures on IJV productivity? Theoretically, we suggest that the ambiguity surrounding these questions reflects the tendency of researchers to view control and collaboration as opposing objectives, studying one or the other; in contrast, we provide a more integrative perspective that blends the two objectives, focusing on common underlying issues relating to enhancing partner commitment, ensuring partner knowledge contributions, and reducing partner risks. We address the most salient design consideration for IJV partners, that is, IJV ownership structure, to posit that joint consideration of the control benefit of a higher foreign ownership level in IJVs and the collaboration benefit of a more balanced IJV ownership structure results in an expected inverted U‐curve relationship between foreign ownership and IJV productivity. Additionally, we posit and test how three environmental contingencies, by affecting the need for control and collaboration in IJVs, would further influence the specific shape of the inverted U‐curve relationship. We find strong support for our theory using an extensive longitudinal dataset of over 5,000 IJVs in China from 1999–2003. We discuss the value of our approach and findings both for researchers and for IJV partners seeking the dual benefits of control and collaboration. Copyright © 2009 John Wiley & Sons, Ltd.     

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.     

Organizational culture and partner interaction in the management of international joint ventures in India

Different from previous research that focused on the formation phase of partnering processes in joint ventures, this study focuses on the post-formation phase and argues that partner interaction processes of communication, cooperation, and conflict resolution play a key role in the implementation and management of joint ventures. We examine how organizational culture differences (OCD) and integration acculturation strategy (IAS) affect international joint venture (IJV) performance through the mediation of partner interaction processes. We develop hypotheses and test them by survey data from 202 executives of IJVs in India. The results suggest that the interaction processes fully mediate the negative effect of OCD but partially mediate the positive effect of IAS on partners?? satisfaction with the joint venture performance. We discuss the implication of these findings for research and practice on post-formation management of IJVs.     

Dynamic capability and IJV performance: The effect of exploitation and exploration capabilities

Drawing on the dynamic capabilities perspective as the overarching theoretical underpinning in the context of IJVs, this study investigates (1) how exploitation capability and exploration capability as two critical building blocks of dynamic capabilities are independently and interactively associated with IJVs’ financial and competitive outcomes in an emerging economy, and (2) how the two context variables (IJV autonomy and organizational culture distance of IJV partners) moderate the effect of exploitation capability and exploration capability on IJV performance. Using a sample of 102 IJVs in an emerging economy, this study finds general support for the theoretical model. Results suggest that IJVs in a foreign emerging economy tend to perform better when they possess greater abilities to exploit current resources as well as by dynamically renewing their competitive advantage. Moreover, exploitation capability and exploration capability interact in such a way that they “reinforce” each other. Lastly, the contribution of exploitation capability and exploration capability to IJV performance is stronger when IJVs enjoy greater autonomy and when the organizational culture distance between partners of IJVs is small. Theoretical and managerial contributions are discussed and limitations and future research are explored.     

Inter-partner control,trust, and radical innovation of IJVs in China: A contingent governance perspective

International joint ventures (IJVs) in emerging markets need to develop radical innovation to compete successfully in the rapidly changing business landscapes there. Taking a contingent governance perspective, this study examines how formal and social governance mechanisms, namely inter-partner control and inter-partner trust, affect radical innovation development in IJVs through knowledge acquisition and integration, and how emerging market institutional governance structures moderate the effectiveness of the two internal governance mechanisms. Based on a sample of 181 IJVs in China, we find that both inter-partner control and inter-partner trust promote IJV radical innovation; moreover, legal enforceability weakens the impact of inter-partner control but strengthens that of inter-partner trust on IJV radical innovation; likewise, government intervention risk weakens the positive role of inter-partner control yet strengthens that of inter-partner trust. This study extends both the innovation and IJV governance literature by connecting governance mechanisms to IJV radical innovation and uncovering important institutional contingencies.     

Do multiple parents help or hinder international joint venture performance? The mediating roles of contract completeness and partner cooperation

We develop a mediation model in which the number of partners in a joint venture affects venture performance through contract completeness and partner cooperation. In a sample of 224 international joint ventures, we find that the number of partners is negatively related to venture contract completeness and partner cooperation, both of which are positively related to joint venture performance. The number of partners is inversely related to joint venture performance and the relationship is mediated by contract completeness and partner cooperation. We discuss theoretical and managerial implications for joint venture research and practice. Copyright © 2007 John Wiley & Sons, Ltd.     

Determinants of Stability in International Joint Ventures: Evidence from a Developing Country Context

Though the number of international joint ventures (IJVs) from developing countries has grown considerably, little has been reported on their operations and performance. The extant literature is based largely on IJVs from developed countries. To help fill this knowledge gap, this paper examines the determinants of stability from a study of 59 IJVs from developing and developed countries operating in a developing country. A multivariate model investigates the impact of a set firm, managerial and culture related factors on the stability of IJVs. Logistic regression analysis reveals that cooperation and physic distance between partners have significant impact on the stability of an IJV. There were no significant differences between stability rates for IJVs from developing and developed countries, but their determinants varied. The paper discusses the implications and limitations of the study, and identifies areas for further research.     

The antecedents and outcome of control in IJVs: A control gap framework

Plenty of researchers have explored the relationship between parent firm control and international joint venture (IJV) performance. However, the conclusions of these researchers are inconsistent. Some studies suggest that total control from foreign parent firms produces better outcomes, while other studies consider that shared control or split control structures result in higher IJV performance. All of these studies argue that a parent firm’s control over an IJV would influence the performance of the IJV. This paper contributes to these debates by exploring the control gap, that is, the difference between desired control and exercised control of a parent firm. Evidence from 80 IJVs in Taiwan indicates that control gaps in the areas of manufacturing, financial, and human resource management have negative impacts on IJV performance. Empirical results also show that the level of a parent firm’s resource contribution to an IJV positively influences the parent firm’s desired control. The extent of a parent firm’s learning intent in marketing and R&D management is also positively linked with the degree of control desired by the parent firm. These findings provide important implications for the study of control structure in IJV management.     

Board representation in international joint ventures

Research summary : Relatively little attention has been paid to boards in international joint ventures (IJVs), and the composition of these boards in particular. We examine the determinants of foreign partners' representation on IJV boards in order to advance our knowledge of this facet of IJV governance. We argue that a foreign partner's representation on the IJV board is related to its equity contribution. However, we hypothesize that this relationship is moderated by IJV and host country characteristics that affect the importance of the internal and external roles IJV boards serve. These results provide insights into the conditions under which a partner might wish to secure greater board representation for its level of equity, or utilize less board representation than might be suggested by its equity level alone. Managerial summary : The functioning and composition of corporate boards have long been seen as critical to managers and shareholders alike. In contrast, the boards of IJVs have been relatively neglected. We advance our knowledge of this important facet of IJV governance. Specifically, we highlight the importance of two roles (i.e., an internal and external role) that IJV boards and directors fulfill. We find that the importance of these internal and external roles of boards determines whether a foreign partner might wish to secure greater board representation for its level of equity, or utilize less board representation than might be suggested by its equity level alone. Our results provide novel insights that can help managers structure their IJV boards. Copyright © 2016 John Wiley & Sons, Ltd.     

Intended and unintended termination of international joint ventures

This study proposes that international joint ventures (IJVs) are terminated either when the initial purposes of the formation of the IJV have been achieved (intended termination), or when unanticipated contingencies that emerge in the external, internal, or inter‐partner conditions after the establishment of the IJV impede the continuation of its operation (unintended termination). Our study examines the factors that affect intended and unintended termination and the longevity of IJVs. The findings show that approximately 90 percent of all IJV terminations are unintended and 10 percent intended, and that the frequency of intended termination and unintended termination varies noticeably depending on the initial purposes of formation. This suggests that the termination of IJVs is significantly contingent on their formation. The findings also show that the longevity of IJVs varies according to the initial purposes of formation, the initial conditions under which the IJV is formed, and the types of unanticipated contingencies that it encounters. The key theoretical issues and practical implications of the distinction between the intended and unintended termination of IJVs are also discussed. Copyright © 2007 John Wiley & Sons, Ltd.     

Board involvement in international joint ventures

The last two decades have witnessed substantial scholarly interest in corporate boards, yet little research has been devoted to boards of international joint ventures (IJVs). We combine the corporate governance and alliance governance literatures in order to study this important ex post governance mechanism for IJVs. We identify a fundamental tension inherent in IJVs, which arises from the unique features of this organizational form and influences the level of involvement by their boards. International joint ventures are hybrid organizational forms that can require administrative control to facilitate monitoring and coordinated adaptation in the presence of exchange hazards. At the same time, the fact that IJVs operate in different host countries can make it efficient to delegate authority to local management for certain collaborations. In investigating the determinants of IJV board involvement, we therefore examine characteristics of IJVs that reflect this underlying tension. We conclude that board involvement reflects efficiency considerations in individual ventures, and the administrative control provided by boards is an important dimension of IJV governance. Copyright © 2013 John Wiley & Sons, Ltd.     

Absorptive capacity,learning, and performance in international joint ventures

This paper proposes and tests a model of IJV learning and performance that segments absorptive capacity into the three components originally proposed by Cohen and Levinthal (1990). First, trust between an IJV's parents and the IJV's relative absorptive capacity with its foreign parent are suggested to influence its ability to understand new knowledge held by foreign parents. Second, an IJV's learning structures and processes are proposed to influence its ability to assimilate new knowledge from those parents. Third, the IJV's strategy and training competence are suggested to shape its ability to apply the assimilated knowledge. Revisiting the Hungarian IJVs studied by Lyles and Salk (1996) 3 years later, we find support for the knowledge understanding and application predictions, and partial support for the knowledge assimilation prediction. Unexpectedly, our results suggest that trust and management support from foreign parents are associated with IJV performance but not learning. Our model and results offer a new perspective on IJV learning and performance as well as initial insights into how those relationships change over time. Copyright © 2001 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。     

Inside the black box: How does resource asymmetry contribute to IJV acquisition intention?

The extant literature has examined the effect of resource asymmetry on IJV acquisition intention, but presents mixed evidence of the effect. Furthermore, prior studies have paid little attention to the mechanism underlying and conditions moderating the effect of resource asymmetry on IJV acquisition intention. Based on transaction cost economics, we argue that resource asymmetry increases IJV acquisition intention through learning race because learning race increases costs of cooperation. Further, we contend that the mediating role of learning race depends on resource complementarity and total resource investment. Using data from 124 IJVs in China and the process conditional modeling, we find evidence supporting our hypothesized moderated mediation. That is, learning race mediates the effect of resource asymmetry on IJV acquisition intention when resource complementarity is at a low level or when total resource investment is at a high level. This study takes the initiative to open the black box of the effect of resource asymmetry on IJV acquisition intention.     

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.     

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.     

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.     

What matters to managerial knowledge acquisition in international joint ventures? High knowledge acquirers versus low knowledge acquirers

Although there is a general agreement amongst scholars that international joint venture (IJV) is a vehicle to acquire technology and knowledge from foreign parents, key factors differentiating high knowledge acquirers from low knowledge acquirers are not yet conclusive. For the purpose of this study, the samples are divided into two groups based on the extent of knowledge acquisition using cluster analysis. Then the two groups are examined to identify the main factors classifying the groups by using logistic regression. This study finds that managerial knowledge that has more sticky characteristics than technology is acquirable know-how. It also shows that trust between parents, international experience of IJV employees, and foreign parent’s support in various managerial functions will considerably increase the extent of knowledge acquisition for IJVs. In conclusion, based on the findings from this study, this paper offers suggestions to IJVs and multinational enterprises investing in Korea.