The dynamic effects of learning: Host country experience and international joint venture termination

Abstract

A lack of host country experience is the fundamental reason for the foreign partner to establish international joint ventures (IJVs) with the local partners while host country experience has also been identified as the primary antecedent of IJV termination. Building on the organizational learning perspective, we propose that the host country experience presents two dynamic but contrasting effects on IJV termination, constituting a U-shaped curvilinear relationship between them. Specifically, we argue that there exist both cooperative and competitive learning and the host country experience changes from complementing to substituting the partnership as the foreign partner adapts from learning about to learning from the partner. Because the contributions of learning depend on environmental conditions, we further conjecture that the curvilinear relationship is steeper for IJVs with multiple partners and in growing industries but flatter for those located in more marketized provinces. An event history study that traces 803 IJVs established in China in 2000 till 2017 has lent support to the hypotheses. Overall, the study challenges previous one-sided arguments by highlighting the dynamic nature of learning while portraying the contingencies.