Partner Substitutability and International Joint Venture Termination: A Partner Interdependence View

Abstract

Previous studies have largely focused on the decisions of multinational partners when investigating the stability of cross- border interorganizational relationships, but ignored the importance of local partners, assuming that multinational firms often have certain advantage over local firms. From an interdependence perspective, we argue that for international joint ventures (IJVs), post-formation alliances activities by both multinational and local partners, which make the focal IJV substitutable, may lead to the instability and termination of the focal IJV. Moreover, post- formation alliances activities by both multinational and local partners can accelerate the IJV termination. However, when IJVs involving higher levels of technology transfer complexity, the mutual dependence of multinational and local partners increases and thus the negative effects of their post-formation alliances activities on IJV survival diminish. We test our theory using data on 841 IJVs formed by 763 local firms and 714 multinational firms from 1990 to 2018 in a multi-country context. Our results show supports to our ideas.