Abstract
Previous research has investigated various factors that influence joint venture (JV) termination. Yet the majority of studies do not distinguish between different types of JVs, particularly whether a JV is related or unrelated to the parent firm. Due to their inherent differences, related and unrelated JVs are likely to evolve distinctly, and their tendency to terminate may also differ under various conditions. This study takes a contingency approach and argues the impact of various factors on JV termination depends upon JV relatedness. An event history analysis finds increases in environmental uncertainty and higher resource complementarity reduce the likelihood that a firm will terminate unrelated JVs as compared to related JVs. Conversely parent firm performance and wider JV scope increase the likelihood that the firm will terminate unrelated JVs as compared to related JVs. The findings suggest the need to consider JV relatedness in understanding JV evolution and termination.
Highlights
Joint ventures (JVs) are known to be short-lived, with estimated termination rates in the vicinity of 50 percent (Harrigan, 1988)
While previous research finds related JVs are less likely to terminate than unrelated JVs (Hennart et al, 1998), there is limited understanding about whether their termination is impacted differently by the factors identified in the literature
The findings suggest the effect of various factors on JV termination is contingent upon the JV’s relatedness with a parent firm
Summary
Joint ventures (JVs) are known to be short-lived, with estimated termination rates in the vicinity of 50 percent (Harrigan, 1988). Related JVs are formed to access existing resources and leverage scale and scope economies, while unrelated JVs are to learn about a new market and acquire new capabilities (Lu and Beamish, 2001; Nielsen and Nielsen, 2009). These differences suggest the evolution of related and unrelated JVs is likely to be differentially affected by various factors.
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