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.