Moderating effects of parent control on international joint ventures’ strategic objectives and performance

Abstract

PurposeThe aim of this study is, first, to explore the moderating effects of parent control on the strategic objectives of foreign firms entering international joint ventures (IJVs) and, second, to assess performance in relation to these objectives.Design/methodology/approachThe study integrates three major theoretical streams in the IJV field to investigate the rationale for the formation of IJVs. The primary data collection method was a web‐based survey. The ability to collect large amounts of data without interviewers, stationery or postage, makes the cost of doing web surveys very attractive. Sino‐European manufacturing IJVs (in industries such as machinery, textiles, and electronics) were investigated.FindingsThe strong empirical evidence in this study confirms the significant moderating effects of parent control on attainment of strategic objectives, suggesting that different strategic objectives of foreign partners have different performance outcomes based on the degree of control exercised by the partner and the focus on different IJV activities. The findings also indicate that market‐developing and knowledge‐acquiring objectives outperform efficiency‐seeking objectives.Research limitations/implicationsThe purpose of this study was to examine satisfaction with performance from the point of view of the foreign IJV partner. Hence, data were collected from foreign senior management who represent foreign partners. Second, the single IJV host country context (China) inevitably raises the question as to whether the findings from this study can be generalised to IJVs in other emerging markets. Third, the relatively small sample size (61 IJVs), although comparable with previous studies, limits the use of more powerful statistical tools.Practical implicationsThe findings of this study suggest that parent companies should formulate different control structures according to different strategic objectives. Second, and rather interestingly, different categories of objectives perform differently in joint ventures. It seems, for example, that, in joint ventures with Chinese partners, European multinational enterprises achieve better results in relation to market development and knowledge acquisition than when seeking organisational efficiency.Originality/valuePrior research has tended to examine the IJV phenomenon from a single theoretical perspective. This study attempts to integrate three major theoretical streams in the IJV field to investigate the rationale for the formation of IJVs. As such, it potentially offers more comprehensive explanatory power. A further innovation is related to the use of a web‐based survey rather than the traditional mail survey.