Developed market partner’s relative control and the termination likelihood of an international joint venture in an emerging market

Abstract

An increasing number of multinational firms from the developed markets (DMs) are seeking rapid expansion into emerging markets (EMs), such as India and China, through international joint ventures with EM firms (E-IJVs). However, nearly half of these joint ventures get terminated unexpectedly within five years of their formation. As E-IJV terminations cause disruptions to the strategy and performance of the partner firms, it is critical to understand factors leading to the termination. Building on the organizational learning perspective, we investigate the impact of DM partner’s relative control on the likelihood of E-IJV termination using a novel dataset of E-IJVs in India between 2001 and 2012. Our findings suggest that higher relative control by DM partner firms increases the likelihood of E-IJV termination. Further, we find that scope of the partnership negatively moderates this relationship, implying that the likelihood of E-IJV termination with a dominant DM partner decreases when the scope is high. We discuss the theoretical contributions and managerial implications of these results.