Parent Control Dynamics and International Joint Venture Performance

Abstract

This article examines the relationship between foreign parent control and International Joint Venture (IJV) performance over the lifecycle of the IJV. Following Geringer and Hebert (1989); Glaister, Husan, and Buckley (2005), Nguyen and Larimo (2008), the paper conceptualizes foreign parent control across three dimensions including mechanism, focus, and extent. The empirical evidence is based on an analysis of 49 Finnish IJVs established in the 1990s. The result shows that foreign parent firms who adopted a control dynamic approach will see better IJV performance. Broad, tight, and formal control exercised by foreign parent firms over their IJVs leads to better performance of those IJVs in the formation stage. When the performance of an IJV is viewed negatively, foreign parent firms who exercise more control over IJVs will see better IJV performance in the post-formation stage. In contrast, when IJV performance is positive in the formation stage, foreign parent firms are likely to exercise less control over the IJV in the post-formation stage.