Jumping Out or Following theRoad Post-Converstion Innovation Behavior of InternationalJointVentures

Abstract

This study examines the effect of converting international joint ventures (IJV) to either local for foreign wholly owned entities on the subsequent impact of innovation from the perspective of knowledge-based view, complementary asset and knowledge recombination literature. We argue that different knowledge compositions (technological vs. complementary) of post-conversion firms affect the way they integrate learnt knowledge with existing ones and subsequent recombination strategies. Based on longitudinal data in China between 1998 and 2013, we use an instrumental variable (IV) estimation to strengthen identification of causal effects. We find that substantial stock of complementary knowledge of post-conversion local wholly owned subsidiaries (LWOS) promotes subsequent recombinant reuse (i.e., reconfigure combinations already known to the firm), while hinders their recombinant creation (i.e., create combinations new to the firm). In contrast, substantial stock of technological knowledge increases the likelihood that post-conversion foreign wholly owned subsidiary (FWOS) will take a recombinant creation strategy, but decreases the likelihood of taking a recombinant reuse strategy. Contingencies such as knowledge features obtained through IJV and external appropriability regimes are discussed. Our study contributes to the literature on IJV operation mode, knowledge-based view, complementary asset, and knowledge recombination.