Environmental uncertainty and survival of international joint ventures: the case of political and economic risk in emerging countries

Abstract

AbstractThis article examines the survival of international joint ventures formed in emerging countries. More precisely, our research consisted in studying the survival rate of international joint ventures, and relating it to country risk. A survival analysis was applied to a sample of 210 international joint ventures that were formed during the year 1996 by foreign partners originating from the European Union and local partners from different emerging countries. This survival analysis was used together with a Cox proportional hazards model testing for the impact of different country risk variables (included in the model as time‐varying constructs) on the hazard rate of international joint ventures. Time‐related variations were observed in their termination rate (i.e., inverted single U variations) and their hazard rate (i.e., curvilinear distribution with honeymoon effect). Concerning the impact of country risk on joint venture survival, the findings provided only a partial confirmation of this impact: the link between country risk and joint venture survival is only supported empirically for the overall score of economic risk. A negative impact was observed and it may be interpreted as follows: a high economic uncertainty is associated with a hazard rate of joint ventures that decreases with time, and vice versa.