Do Japanese investors use their joint ventures with European partners in Europe as Trojan horses to capture Their Knowledge?

Abstract

Purpose – We investigate whether the partnership behavior of Japanese partners in joint ventures (JVs) with European partners in Europe is better explained by the Trojan Horse Hypothesis (THH) than by the cooperative specialization (CS) view. THH assumes that Japanese firms establish JVs to steal the knowledge of their partners and dissolve JVs as soon as they have achieved their goals. The CS view, however, argues that Japanese firms set up JVs to achieve CS and that these JVs will be long-lived. Methodology – We first derive implications of both the THH and the CS views for the longevity of JVs. We make a census of all two-partner Japanese–European JVs manufacturing in Europe in 1987 and record their evolution to 1996. We count how many of these JVs have evolved in ways that are predicted by the THH and the CS view. We argue that a particular view is supported if the number of JVs following the predicted path is larger than the number of those following alternative paths. Findings – We find that the partnership behavior of Japanese firms is more consistent with a CS than with a THH view. Limitations – This is a conservative test of THH behavior since JVs can dissolve for other reasons than the knowledge-stealing behavior of their Japanese partners. Value of the Paper – This is, as far as we know, the only study that has investigated the evolution of the population of Japanese–European JVs in Europe and has derived implications for the validity of the THH and CS views of JVs.