Value Creation in International Joint Ventures: Impact of Inter-Partner Factors and Location

Abstract

One key goal when establishing international joint ventures (IJVs) is to create value in different ways for the partnering firms. The value creation can be via new innovations, more effective production processes, taking benefit of the synergy effects in various functions, and so on (see e.g. Deeds and Hill 1996; Barringer and Harrison 2000). The literature on IJV research shows that internal partner factors (Brouthers and Bamossy 2006) and the interaction between partners often significantly influence the cooperation. In addition, the effect of location factors on the operations of firms has been emphasized in international business research (Miller and Eden 2006). However, the current literature related to value creation in strategic alliances and IJVs provides relatively limited empirical results about these influences. Lee et al. (2013) found that value creation differs between alliances located in developing and developed countries. Furthermore, prior research suggests that resource complementarity between partners enhances the value creation potential in IJVs (Kumar 2008). Previous studies (e.g. Pothukuchi et al. 2002) suggest that both national and organizational cultural differences also play a crucial role in the operation and effectiveness of IJVs. Some studies (e.g. Hennart and Zheng 2002; Pothukuchi et al. 2002) have found that cultural differences have a negative impact on IJV operations, and some others (e.g. Li et al. 2001) have found a positive influence. Besides, interactions between partners, such as inter-partner flexibility, communication, trust, and control mechanisms, seem to be important factors that impact upon IJV operations (Vaidya 2000). On the one hand, several IJVs do not reach the value creation goals set for them and the units are therefore subsequently terminated (Christoffersen 2013); on the other hand, the earlier results of the value creation effects of several variables are mixed. Therefore it is important to investigate more fully the impact of various inter-partner and location related variables on value creation in IJVs.