Actualization of growth potential in international joint ventures: The moderating effects of localization strategies |
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| Institution: | 1. National Research Base of Intelligent Manufacturing Service, Chongqing Technology & Business University, Chongqing 400067, China;2. Haub School of Business, Saint Joseph’s University, Philadelphia, PA 19131, USA;1. INSEAD, Boulevard de Constance, 77305, Fontainebleau Cedex, France;2. City University of Hong Kong, Hong Kong;3. Faculty of Management, University of New Brunswick, Fredericton, NB, E3B 5A3, Canada;1. Nottingham University Business School, University of Nottingham, Nottingham, NG8 1BB, UK;2. School of Business Administration, Dongbei University of Finance & Economics, China;3. Alliance Manchester Business School, University of Manchester, Manchester, Booth Street West, Manchester, M15 6PB, UK;4. International Business, School of Business, Renmin University of China, Beijing, China;5. School of International Trade & Economics, University of International Business and Economics, Beijing, 100029, China;6. University of Liverpool Management School Chatham Street, Liverpool, L69 7ZH, UK;1. Chair of Human Resources Management and Asian Business, University of Göttingen, Platz der Göttinger Sieben 5 (Blauer Turm), 37073 Göttingen, Germany;2. School of Business, Yonsei University, 50 Yonsei-ro, Seodaemun-gu, 120-749 Seoul, South Korea;1. Department of Strategic Management, Marketing and Tourism, University of Innsbruck, Universitätsstrasse 15, Innsbruck, 6020, Austria;2. Department of Strategic Management, Marketing and Tourism, University of Innsbruck, Department of Management & Law, MCI Management Center Innsbruck, Universitätsstrasse 15, Innsbruck, 6020, Austria;3. Faculty of Economics and Management, Free University of Bozen-Bolzano, Universitätsplatz 1 Piazza Università, Bozen-Bolzano, 39100, Italy;1. Emeritus Professor of International Business, Baruch College, City University of New York, New York, NY, USA;2. Jindal Chair of Global Strategy, Jindal School of Management, University of Texas at Dallas, Richardson, TX, USA |
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| Abstract: | We employ the growth options perspective to examine how multinational corporations’ localization strategies facilitate the actualization of growth potential preserved in international joint ventures (IJVs). This study uses a data of Korean IJVs; it accounts for the endogeneity associated with a firm’s decision to exercise growth options through a two-stage model. We find that the enlarged IJVs, via conversion to majority ownership under reduced host market demand uncertainty, performed better. We also find that the realized growth potential are larger for IJVs that have more local business ties with other firms, or that hire more local employees. This study contributes to the growth options literature by examining the strategies that enable firms to exploit evolved exogenous uncertainty, and thus actualize upside growth potential. |
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| Keywords: | Multinational corporations Growth options International joint ventures Host market uncertainty Performance |
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