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.     

Government corruption and foreign stakes in international joint ventures in emerging economies

This paper analyzes the relationship between government corruption and the changes in the equity stake of foreign partners in international joint ventures (IJVs) formed with local firms in emerging Asian economies. This relationship is defined according to transaction cost theory. This relationship is complemented by the introduction of a moderating variable derived from organizational learning theory: the country experience of foreign partners. This article is based on a sample of 171 European firms, which formed IJVs in emerging Asian economies during the year 1996. Using an event history analysis, the evolution of each European equity stake was followed-up from year 1996 to the end of the period at risk on January 2007. From the empirical results presented in this article, some findings have been drawn on the attitudes of foreign firms toward government corruption in emerging Asian economies. First, we showed that the government corruption is significantly related to the likelihood of foreign partners to terminate the IJV. However, the nature of this relationship is differentiated according to the score used to measure government corruption. The relationship is positive when using the Transparency International score and negative with the Political Risk Services score. Second, we put into evidence that the country experience of foreign partners moderates the relationship between government corruption and the changes in the equity stake of foreign partners in IJVs in emerging Asian economies.

Research notes and communications factors in the instability of international joint ventures: An event history analysis

This study uses Event History methodology to examine factors that may contribute to the instability of joint ventures between U.S. multinationals and foreign companies. Using joint venture contract renegotiation as a proxy for instability, it finds statistically significant support for hypotheses that joint ventures are more unstable when partners start out with uneven shares of equity and when the contracts have been renegotiated before. Contract renegotiation is also more likely in relatively open economies than in countries that impose restrictions on direct investment.     

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.     

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 and international diversification among Japanese multinational firms

This paper examines the relationship of performance with product and international diversification on Japanese multinational firms from 1977 to 1993. We show the relationships between diversification and performance change over time through the use of multiple time periods and accounting for keiretsu membership. Results show that while diversity strategies vary between keiretsu and non‐keiretsu firms, performance is not much different. Across time periods, performance varies considerably, but strategies are less variable. Product diversity has weak effects on firm performance only in one time period, while international diversification has negative profitability and positive growth consequences in in some periods. These results suggest first that diversification strategies and their effects on performance vary across time periods and generally produce some unexpected findings. We do not find strong interactive diversity effects. Copyright © 2000 John Wiley & Sons, Ltd.     

Acquiring knowledge by foreign partners from international joint ventures in a transition economy: learning‐by‐doing and learning myopia

This paper proposes and tests a model of how firms acquire knowledge from their international joint venturing experience. Based on survey responses from 73 Singapore and 89 Hong Kong firms with respect to their joint ventures set up in China, the results indicate that both overseeing effort and management involvement are significant channels of knowledge acquisition. The former channel is more important for firms with a great deal of operational experience in China and for parents of older joint ventures. This finding indicates that firms improve their skills of knowledge acquisition through learning‐by‐doing. Moreover, the strategic importance of the venture concerned, instead of the learning intent of the parent, is the driving force behind the allocation of resources to the two channels. This implies that firms mainly learn through managing their key joint ventures. Since a venture that provides novel and fruitful learning experience may not, and need not, be an operation of great strategic importance, this finding suggests the existence of learning myopia. Copyright © 2002 John Wiley & Sons, Ltd.     

International Diversification and Performance: Evidence from Singapore

This study focuses on how international diversification affects a firm in terms of multiple performance measures (accounting-based, market-based, and intangible value creation). The study is unique as it uses segment data made available only recently, which enables the examination of both product and international diversification with performance. The period studied coincided with Singapore firms performance during the Asian Financial Crisis. In contrast to previous studies on Singapore, our results show that product diversification is negatively correlated to all measures of performance, while international market diversification is positively correlated. We attribute the difference to the time period which covers both upswings and downturns of the economy, unlike previous studies which considered only the former. Other control measures were incorporated; firm size is highly significant in explaining all measures of performance but not so for firm age, leverage, risk and industry. For top managers, we suggest that regardless of economic climate, the dominant diversification strategy is to take a focused approach to product diversification, but a broad approach to international diversification.Dr. Er and Dr. Kwok are assistant professors in the Department of Finance & Accounting, National University of Singapore (NUS). Mr Lin recently graduated with a B.B.A. honours (1st class) degree from NUS.     

Imitative innovation and international joint ventures: a dynamic analysis

In this paper we deal with some dynamic issues of international joint venture in the context of a developing country. We provide a rationale for international joint venture formation, as well as its subsequent instability, where instability is interpreted as payoff readjustments between the partners in the venture. Although the joint venture is formed in response to government restrictions on foreign equity holdings in the first period, its subsequent instability is caused by both the change in government policy, as well as the outcome of imitative technological innovation undertaken by the host partner. It is also shown that uncertainty about the government policy in the second period plays an important role in the formation of joint venture in the first period.     

Foreign entry and survival: Effects of strategic choices on performance in international markets

This paper investigates effective strategies that can reduce the risk of failure in international expansion by examining the entry and survival of foreign subsidiaries in the U.S. computer and pharmaceutical industries over the 1974-89 period. Using a hazard rate model, we examine the effects of (1) diversification strategies, (2) entry strategies, and (3) organizational learning and experience on the survival probabilities of foreign subsidiaries. The results show a higher exit rate for foreign acquisitions and joint ventures than for subsidiaries established through greenfield investments. The results also indicate a higher exit rate for subsidiaries that diversify than for those that stay in the parent firm's main product areas. Finally, the results show that firms benefit from learning and experience in foreign operations, which improves the chances of success for subsequent foreign investments. These findings shed light on the dynamic process of international expansion and the evolution of the multinational corporation.     

Types and functions of social relationships in the organizing of an international joint venture

This paper examines the use of social relationships in the organizing of a business network in the case of an international joint venture (IJV) developing over time. The organizing process and the multicultural setting of the international joint venture emphasize the actions of and interactions between individuals from various organizations. The IJV-managers' use of their social relationships in business organizing is explored through analysis of narratives of IJV-managers in a longitudinal single case to provide empirically grounded theory. From the in-depth interviews with IJV-managers the business relationships are identified as characterized by four possible levels of interpersonal relationships whose type influences the functions of the relationships and visa versa. One business relationship may contain only one or many of these interpersonal levels and an effective business relationship contains the appropriate interpersonal level for the business issue at hand.     

Interpartner Fit and Its Performance Implications: A Four-Case Study of U.S.-China Joint Ventures

In previous research on international joint ventures, a commonly accepted conceptualization and operationalization of interpartner fit is lacking. As a result, empirical studies have either failed to confirm theoretical predictions or produced inconsistent findings that are difficult to reconcile. Using a multiple-case method, this study developed a model in which interpartner fit is conceptualized as a multidimensional construct consisting of the compatibility between the partners strategic objectives, contribution and joint management of critical resources, consensus on the venture's operating culture and strategy, and structure of relative bargaining power and control over the venture's operation. The longitudinal case studies demonstrated the relationship between interpartner fit and joint venture performance and also revealed the rich dynamics and changes in interpartner fit'misfit over time.     

The independent and joint effects of the skill and physical bases of relatedness in diversification

By examining the independent and joint effects of the skill and physical bases of relatedness, this study develops a multidimensional view of relatedness in diversification. The paper compares the ways the two bases identify relatedness, and examines empirically the relationship between relatedness and performance for a sample of 158 large diversified manufacturing firms. Each base of relatedness alone had no significant effect on financial performance. However, when the two approaches were combined, there was a strong positive effect on most indicators of performance. The findings demonstrate how different bases of relatedness complement and extend one another, and they clarify findings of previous studies that used a single base of relatedness. © 1998 John Wiley & Sons, Ltd.     

Order of entry and performance in international markets

The inter-market and intra-market orders of entry and their performance consequences are examined for an industrial product. First entrants consist typically of both multinational and local firms, while early followers are multinational firms, and later entrants are smaller, local firms. A strong order of entry-market share relationship is observed in international markets. First entrants and later entrants outsurvive early followers. The analysis reveals a strategy for achieving both first-entry into many markets and dominance within those markets. Simultaneous entry into multiple markets occurs infrequently and in mature stages of the product life-cycle.     

Getting there in a global industry: Impacts on performance of changing international presence

We investigate the effects of increasing and decreasing international presence on market share and survival in the American medical diagnostic imaging equipment industry. Imaging equipment manufacturers possessing international medical operations tend to achieve superior market share and longer survival, but we find that attempting to become an international medical player is risky. Both increasing and decreasing international presence have negative associations with survival, while decreased internationalization is associated with decreased American market share. Brief case studies suggest that the ingredients for success in internationalization may include preparedness, focused management, and learning from international experience.     

Power plays: Regulation,diversification, and backward integration in the electric utility industry

This paper explores how regulatory oversight influences strategic management. Predictions of the extent to which a firm diversifies and integrates upstream based on transaction-cost economics are developed and then tested among 49 American electric utilities from 1974 through 1986, a period that witnessed increasingly hostile regulatory relations. The results confirm the influence of regulation on both diversification and backward integration, supporting the transaction-cost view of these phenomena. The implications of these findings for the study of interorganizational relations, the concept of implicit contracting as a governance mechanism, and the pursuit of longitudinal theory-building are discussed.     

Firm innovativeness and business performance: The joint moderating effects of market turbulence and competition

To clarify the nature of the effect of firm innovativeness on business performance, this study draws on contingency theory and an interactional perspective to develop a conceptual framework to investigate how the interaction between market turbulence and competitive intensity moderates the relationship between firm innovativeness and business performance. This study used survey data from a sample of 154 high-tech manufacturing firms in Taiwan and employed hierarchical moderated regression analysis to test the hypotheses developed. The results reveal that the effect of firm innovativeness on business performance varies across the different configurations of market turbulence and competitive intensity. Specifically, the performance effect of firm innovativeness is most positive under high market turbulence and high competitive intensity; the performance effect is least positive under low market turbulence and low competitive intensity. However, the performance benefits of firm innovativeness fail to materialize under low market turbulence and high competitive intensity. Overall, these findings highlight that market turbulence and competition jointly influence the direction and strength of the performance effect of firm innovativeness. This study advances firm innovativeness research by identifying the configurational market conditions that augment or limit the value of firm innovativeness.     

Choice of ownership mode in joint ventures: An event history analysis from the automotive industry

Inter-firm partnerships continue to be a major trend in the B2B context. Firms seek collaborative ventures to enter foreign markets, combine resources, share costs and risks, and build synergies in an increasingly competitive environment. Accordingly, the impacts of firm and host country characteristics on the selection of entry mode have been extensively studied in the literature. Nevertheless, most of these studies regard all entry modes as feasible alternatives for firms, which is rarely the case in practice. Instead, the number of entry modes available to a firm is more likely to be limited by the firm's assets and the context of the host country. As such, these contingencies, coupled with the idiosyncrasies of each entry mode, necessitate more focalized inquiry in the entry mode literature. Drawing from the OLI framework, this study zeroes in on international joint ventures (IJVs) and analyses the impact of ownership and location advantages on firm's decision about the level of control (i.e., internalization level) in an IJV in a given country. Results indicate a positive relationship between the ownership advantages and the level of control. It is also found that firms tend to favor higher control mode where the host country provides better locational advantages.     

The use of information technology tools in new product development phases: Analysis of effects on new product innovativeness, quality, and market performance

Extant research has largely ignored empirically examining how information technology (IT) affects new product effectiveness. Using the knowledge-based theory as a foundation, this study examines if, and how, particular IT tools used in the discovery, development, and commercialization phases of the new product development (NPD) process influence NPD effectiveness dimensions, namely, market performance, innovativeness, and quality of a new product. Based on data collected from NPD managers in the US and Canada, the findings indicate that specific IT tools contribute to various measures of new product effectiveness differently. Moreover, the results show the positive effect of these IT tools in different phases of the NPD process. This suggests that with regard to NPD, a decompositional approach that examines the role of IT within each phase of the NPD process is best. Based on these findings, the authors discuss theoretical and managerial implications of the study and suggest paths for future research. Managerially, some interesting results of our study are that decision support systems, file transfer protocols, and concept testing tools would significantly improve NPD effectiveness regardless of the phase they are used.