Resource Complementarity Between JV Partners and Joint Venture Performance

Abstract

This study proposes a framework to characterize resource complementarity between Multinational Enterprises (MNEs) and local partners. The framework consists of two dimensions: the relative strength of MNE partners’ firm?specific advantages and the relative strength of local Korean partners’ firm?specific advantages. The combination of the two dimensions generates four types of JVs. In the first type, the relative strength of both partners’ firm?specific advantages is strong, suggesting that both partners are strong in their respective firm?specific advantages. This type of JV turned out to be the best performer, using a performance measure of satisfaction with JV performance. In the second and third types of JVs in which either Korean or MNE partners’ firm?specific advantages were evaluated to be relatively weak, no performance difference was found. In the fourth type of JVs, the relative strengths of both partners’ firm?specific advantages are evaluated to be weak, indicating that both partners are not strong in their respective firmspecific advantages. In other words, MNE partners are stronger than Korean partners in Korean partners’ firm?specific advantages while Korean partners are stronger than MNE partners in MNE partners’ firm?specific advantages. The fourth type of JVs represents “reverse” resource complementarity, a situation that cannot be observed in real cases. Thus, the last type of JVs are dropped from the proposed framework. In short, the findings of the study suggest that resource complementarity matters to JV performance, as assumed by the researchers studying the relationship between resource complemetarity and JV formation.