Joint Venture Experience Research Articles

Embracing complexity: Learning from minority, 50-50, and majority joint venture experience

Learning from joint venture (JV) experience is commonly viewed as a way to improve JV performance. However, many JVs are complex and difficult to learn from. How can firms embrace this complexity to realize the learning potential of their JV experience? To answer this question, we consider how minority, 50-50, and majority JVs differ in terms of complexity stemming from the interdependencies between the JV partners and between the JV and its parent organizations. We theorize that the relatively limited complexity of minority JV experience facilitates learning from more complex experience with majority and 50-50 JVs. However, the same facilitating effect is not expected between two forms of complex experience. We test these predictions on a comprehensive set of equity JVs formed by Dutch listed companies between 1966 and 2005, using JV survival and abnormal stock market returns as complementary JV performance measures.

Inward joint venture experience and entry mode choice of Chinese firms abroad

PurposeSince joint venture experience obtained from inward FDI may create a positive or negative impact on ownership mode choice, it is difficult to predict its direct impact. The purpose of this paper is to combine the organizational learning and agency perspectives to find whether CEO power can moderate the effect of inward joint venture experience.Design/methodology/approachUsing a sample of 337 foreign entries conducted by 77 Chinese firms during 1998-2008, this study has tested some interaction effects of inward joint venture experience and CEO power measures.FindingsThe author finds that inward joint venture experience interacts with CEO ownership and CEO duality, respectively, to have a negative impact on the selection of high-equity mode.Originality/valueThis study contributes to entry mode literature by finding that inward (but not merely outward) FDI experience can influence entry mode choices and by combining agency theory and the organizational learning perspective to solve the theoretical conflicts created by the two opposite effects of a FDI experience.

The internationalization of emerging economy firms: Substitution and location choice

While the international business literature has become increasingly interested in technology-seeking foreign direct investment, little is known about the alternatives to sourcing knowledge abroad. Specifically, it is unclear how domestic strategies influence the propensity of emerging economy firms to invest abroad in search of knowledge. This study examines the ways in which international joint ventures with foreign multinational enterprises in a firm’s host country influence the location choice of emerging economy firms. Moreover, we address the extent to which this relation is influenced by firms’ absorptive capacity and the revealed comparative advantage of the firm’s home country. Using data on inward and outward foreign direct investment in China in the period 1978-2014 we find that domestic joint venture experience significantly influences the location choice and that both firms’ absorptive capacity and the strength of its domestic industry influence the preference for more advanced host countries....

Reducing cultural uncertainty through experience gained in the domestic market

This paper addresses one of the major debates in the international strategy literature: whether the transfer of experiential knowledge is bound within the cultural boundary of a firm's home country. We argue that some experienced firms can transfer experiential knowledge gained in their domestic market or foreign market to the focal host country in their initial investment. Drawing on the organizational learning literature, this study proposes the boundary conditions under which multinational corporations (MNCs) with experiential knowledge gained in their domestic markets through joint ventures with foreign partners benefit in their initial entry into the host country. The results provide support for the hypotheses, and according to the empirical analysis, MNCs’ cross-border joint-venture experience gained in the domestic market can facilitate their expansion into host countries culturally similar to foreign partners’ originating countries by reducing cultural uncertainty perceived in the focal host country with respect to doing business in general.

"Complexity, Heterogeneity, and Transfer Effects of Joint Venture Experience on Performance"

Joint ventures (JVs) are complex and heterogeneous investment vehicles. Hence, prior JV experience may be difficult to understand and transfer correctly to a subsequent JV. Focusing on differences between minority, majority, and 50-50 JVs, we argue that minority JVs are primary learning vehicles about joint venturing and thus are a springboard from which to launch and learn about the more complex majority and 50-50 JVs. Empirical analyses of 909 JVs formed by 25 Dutch firms over four decades (1966-2005) revealed that minority JV experience enhances ex-ante and ex-post performance benefits associated with majority and 50-50 JV experience. However, transfer effects between majority and 50-50 JV experience were negative.

Learning to manage risks in international R&D joint ventures through ownership decisions

PurposeThis paper aims to examine the interaction between risk, learning and ownership decisions in international R&D joint ventures.Design/methodology/approachThe study focuses on international strategic R&D joint ventures of US firms. The sample is made up of 266 firms. Regression models are used in the testing of the hypotheses.FindingsThe authors show a clear difference between the effects of performance versus relational risks on ownership decisions in international joint ventures (IJVs). In response to performance risk, firms are less likely to pursue a majority ownership, whereas with relational risk the effect is opposite.Originality/valueA key contribution of this paper is that it shows the effects of performance versus relational risks on ownership decisions in IJVs. Another contribution is the finding that IJV experience moderates the effects of relational risk factors on firms' ownership decisions in joint ventures. With greater joint venture experience, firms are more likely to take a non‐dominant position in response to diverse partners as they develop routines and capabilities that allow them to better manage IJV partners and minimize the risk of partner opportunism without the need for majority ownership.

Domestic and International Equity REIT Joint Ventures: Structuring Corporate Options

We examine a sample of 185 Joint Ventures parented by publicly-traded Equity Real Estate Investment Trusts 1994–2001. These transactions are found to be motivated by a wide variety of corporate strategies. Shareholder returns for REIT parents are significantly positive, which is consistent with wealth effects previously reported for joint ventures formed by non-REIT real estate firms. In a subsample of joint ventures formed to structure partial dispositions of property, however, abnormal returns are significantly negative, which is consistent with the free cash flow theory of Jensen. REIT joint venture experience in Asia has been neutral for value, but may improve in the future if early ventures have created options for more efficient partnerships later.

Political constraints, organization design and performance measurement in China’s state-owned enterprises

This study develops a theoretical model to test how political constraints on labor decisions mediate the effects of economic liberalization forces on aspects of organizational design such as delegation, performance measurement, and incentives in Chinese state-owned enterprises. Hypotheses tests using a large survey of divisional managers generally confirm the model: that the influence of three liberalization forces (industry level growth and foreign firm competition, joint venture experience and stock market listing) on organization design is mediated by political constraints.

Predicting Organizational Success within a Project-Based Joint Venture Alliance

Project-based joint ventures (a special type of alliance) are an often-used method to form competitive organizational structures in the global market; they allow participants to quickly assemble project-needed assets on a short-term basis without substantial investment. However, published discussions of joint ventures describe mixed success and focus on factors that affect the ventures after they are formed. This paper exposes factors, which may be observed at joint venture inception, that are predictive of organizational success within the joint venture. The survey research of U.S. architecture/engineering/construction (A/E/C) firms indicates that smaller partners in a joint venture experience more market growth and are more successful. Also, a firm with strength in legitimacy (client trust) is more likely to gain in short-term income but will likely suffer some long-term market loss in comparison to its less-legitimized partners. It is further concluded that culture match among partners plays a significant role in ensuring profitable joint venture returns.

The adoption of “Western” management accounting/controls in China's state-owned enterprises during economic transition

This study explores the influences on the adoption of “Western” management accounting/control practices by China's state-owned enterprises (SOEs). This topic is important given the potential for such practices to affect SOE operations in the midst of China's continued privatization programme, and the continued opening of its markets to competition. In-depth interviews were conducted with managers at four SOEs and two of their joint ventures. These interviews indicated increased use of a range of Western management accounting/controls in the SOEs. They also shed light on the factors that influenced the level of adoption. These findings were used to refine a survey instrument for data collection from 82 other SOEs. The survey indicated significant and predicted influences from use of limited-term employment contracts, joint venture experience, stock exchange listing, and the availability of training.

Joint venture research and development activity: an analysis of the international biotechnology industry

The research question we investigate is under what conditions will joint ventures engage in research and development (R&D) activity within the context of a global, high-technology environment. To explore this question, we examine the collective impact of initial conditions that influence the presence of R&D activity among joint ventures (JVs) formed in the global biotechnology industry. Our investigation is driven by two streams of research in joint ventures: transaction costs and initial conditions. Specifically, we examine whether business relatedness, cultural relatedness, country risk, and prior joint venture experience are related to R&D activity in joint ventures. Our results show that cultural relatedness and country risk factors do matter when it comes to R&D activity in biotechnology joint ventures. On the other hand, business similarities and prior JV experience between the parents do not seem to be as important as one might expect.

How do international joint ventures create shareholder value?

This study attempts to identify conditions under which announcements of international joint venture (JV) formation lead to increases in shareholder value of participating U.S. firms. It does so by combining the singular theoretical foci of previous work on the topic and specifying previously unconsidered, but conceptually important, influences on firms' expected JV performance. The study's findings indicate support for the hypothesized effect of variables in partners' task-related, competitive, and structural context(s), but not those in these firms' partner-related and institutional context(s). Specifically, partner–venture business relatedness, the pursuit of R&D-oriented activity, greater equity ownership, and large firm size, all are found to have a positive impact on firms' JV-based value creation. Although this study finds support for the performance impact of firm-level competition, the direction of this impact is contrary to that hypothesized. No support is found for hypothesized effect of partner–partner business relatedness, previous JV experience, partners' relative firm size, (national) cultural relatedness, and JV host country political risk. Copyright © 2000 John Wiley & Sons, Ltd.

Private Funds, Utility Development, and Government Policy

Between 1995 and 1997, the Clark Development Corporation (CDC) used the joint venture model, a variety of the built-operate-transfer (BOT) model, to attract private funds for utility development in the Clark Economic Zone in the Philippines, located on the site of the former Clark Air Base. The principle elements of the joint venture model were a capital investment by a strategic partner and eventual sale to the public of the CDCs share of the joint venture corporation. Gavieta states that the success or failure of such a program is largely dependent on the conduct of the bid solicitation and the contract award process. Lessons learned from the joint venture experience concerned the absence of construction completion guarantees, performance undertakings, and environmental insurance cover; minimum bid price; tariff caps versus IRR caps; valuation of the existing right of way and equipment qualitative evaluation of bidders; minimum term commitments by joint venture partners; independent third-party venture evaluation of joint venture performance; and corporate governance of joint ventures.

Performance of international joint ventures from developing and developed countries: An empirical study in a developing country context

In response to the need for research on International Joint Ventures (IJVs) from developing countries, this paper examines the multivariate determinants of performance of 59 IJVs from both developing and developed countries in a developing country context. Resource complementarity, cooperation, joint venture experience, technology and export-orientation were found to be significant determinants of performance of joint ventures. While the determinants varied for IIVs from developing and developed countries, there were no significant differences in their performance levels. The empirical findings and their implications, including limitations and areas for further research are discussed.

Joint venture attitudes and experience: A TIE Research Survey

Joint venture attitudes and experience: A TIE Research Survey