Local Joint Venture Research Articles

Market exit and re-entry in a volatile emerging economy: a case study of Yamaha motorcycles in Pakistan

PurposeThis study aims to understand the dynamics underpinning the exit and re-entry strategies adopted by multinational enterprises (MNEs) in an emerging market, Pakistan.Design/methodology/approachThis study undertook an in-depth historical case study of Yamaha Motorcycles, which had initially entered Pakistan as a joint venture but had then exited and re-entered as a wholly owned subsidiary.FindingsThis study found that, despite its status as a market leader and one of the older players in the Pakistani market, changing market dynamics in the 2000s – especially the increased competition brought by more affordable (inexpensive) Chinese motorcycles and the weak enforcement of industrial policies – had pushed Yamaha Motorcycles to exit. Another factor that had contributed to its exit were differences in risk perception and strategies with its local joint venture partner (a Pakistani business group). Hence, both firm-level and institutional factors had played significant roles in Yamaha’s market exit. This study further found that re-entering in a wholly owned subsidiary operation mode had been beneficial for the firm, as it gained a significant market share due to its focus on innovation and on capturing a market niche, which had earlier not been its main focus. The findings also suggest that opportunity logics and multiple forms of learning can be important for a firm’s re-entry into a host market – such as experiential (i.e. learning from experience) and vicarious learning (i.e. learning from other organizations, including suppliers and competitors) in an emerging market context, in which institutions evolve amid political and policy uncertainty. Finally, this study found that exit and re-entry timing is an important factor for the development of competitive advantage in a host market.Originality/valueThis study is among the few to have investigated the exit and re-entry strategies of MNEs in emerging markets. The relatively short time during which Yamaha Motorcycles had been out of the market had benefited it on its re-entry, as the firm had been able to capitalize on its prior learning and ties to suppliers’ networks.

Managing International Branch Campuses: What Do We Know?

AbstractOver the last decade, the growth of the international branch campus (IBC) has been one of the most striking developments in the internationalisation of higher education. There are now over 200 IBCs across the world, mostly in the Middle East and East and South‐east Asia. Despite the growing numbers of IBCs and the considerable financial and reputational risk they pose to their home universities, relatively little is known about the challenges of managing these foreign outposts. This paper reviews the growing, but still fragmented, literature in this increasingly important sector of higher education. It finds that managers of IBCs are faced with a range of challenges, which primarily stem from dealing with key stakeholder groups: students, staff, home and host country quality regulators, the home university and the host government, as well as the IBC's local joint venture partners. It concludes that further work is required to better understand the factors which influence and constrain IBC managers in balancing the competing interests of stakeholders.

Fragmented Liberalization in the Chinese Automotive Industry: The Political Logic behind Beijing Hyundai's Success in the Chinese Market

AbstractThis paper explains the extraordinary rise of the Beijing Hyundai Motor Company (BHMC), a joint venture between a state-owned enterprise run by the Beijing municipal government and Hyundai Motor Company. Within the span of three years, the BHMC soared to become China's second-ranked automotive manufacturer in terms of units sold. I highlight the role of the Beijing municipal government in creating favourable market conditions for the BHMC during its initial operation phase (2002–2005). The Beijing municipal government selectively adopted protectionist measures and liberalizing measures to promote its locally based company. I characterize this practice asfragmented liberalization,a system through which sub-national governments discriminately apply WTO or central government regulations to promote their local joint venture partner. In so doing, I also challenge the existing assumption that multinational companies are the drivers of economic liberalization, by showing Hyundai's support for local protectionism and industrial policy at the sub-national level.

Management Insights

Management Insights

Ethnic Innovation and U.S. Multinational Firm Activity

This paper studies the impact that ethnic innovators have on the global activities of U.S. firms by analyzing detailed data on patent applications and on the operations of the foreign affiliates of U.S. multinational firms. The results indicate that increases in the share of a firm's innovation performed by inventors of a particular ethnicity are associated with increases in the share of that firm's affiliate activity in countries related to that ethnicity. Ethnic innovators also appear to facilitate the disintegration of innovative activity across borders and to allow U.S. multinationals to form new affiliates abroad without the support of local joint venture partners. This paper was accepted by Bruno Cassiman, business strategy.

Contracting institutions and ownership structure in international joint ventures

This paper examines the role of contracting institutions on a multinational firm's optimal ownership strategy. We develop a model in which both a multinational firm and its local joint venture partner can ex post engage in costly rent-seeking actions to increase their ex ante agreed upon revenue share. We show that the host country's level of contract enforcement and level of judicial favoritism affect the parties' incentives to contribute to the international joint venture. The model allows us to identify testable hypotheses relating these institutional features with the performance and optimal ownership structure of international joint ventures.

Contracting Institutions and Ownership Structure in International Joint Ventures

This paper examines the role of contracting institutions on a multinational firm's optimal ownership strategy. We develop a model in which both a multinational firm and its local joint venture partner can ex post engage in costly rent-seeking actions to increase their ex ante agreed upon revenue share. We show that the host country's level of contract enforcement and level of judicial favoritism affect the parties' incentives to contribute to the international joint venture. The model allows us to identify testable hypotheses relating these institutional features with the performance and optimal ownership structure of international joint ventures.

Joint Venture Strategy for Emerging Economy: Evidence From Russian Energy Sector

This paper investigates the strategies of global companies operating in power generation and supply, electrical equipment, and oil and gas industries in Russia. Russian energy sector has been considered by these companies as a huge and perspective and Russia has shown in the last two decades the greatest activity in the field of internationalization of major national industries through IJVs. Local joint ventures are therefore one of the cornerstones of these firms strategy in the respective energy sectors of Russia’s economy. These partnerships facilitate the entry process to Russia, raise an efficiency of post-entry operations, and prevent the state intervention in Russian operations of western companies.

Ethnic Innovation and U.S. Multinational Firm Activity

This paper studies the impact that ethnic innovators have on the global activities of U.S. firms by analyzing detailed data on patent applications and on the operations of the foreign affiliates of U.S. multinational .rms. The results indicate that increases in the share of a firm’s innovation performed by inventors of a particular ethnicity are associated with increases in the share of that firm’s affiliate activity in countries related to that ethnicity. Ethnic innovators also appear to facilitate the disintegration of innovative activity across borders and to allow U.S. multinationals to form new affiliates abroad without the support of local joint venture partners.

Identification of management development needs: a comparison across companies of different ownership – foreign, joint venture and local in Sri Lanka

This paper presents the results of an empirical investigation of seventy-eight human resource managers employed in seventy-eight wholly foreign-owned, foreign and local joint venture and wholly local-owned export-oriented clothing manufacturing companies in Sri Lanka. The study investigated human resource managers' views on whether organizations identify development needs of managers, and, if so, from what sources. The findings of the study shed light on the identification of management development needs and on differences across companies of different ownership. The data revealed evidence of the existence of the identification of development needs of managers in the industry. Organizational strategies, succession plans and performance appraisal give rise to identify development needs of managers, other than requests from both heads of divisions/immediate superior managers who like their subordinates to be developed and managers themselves who desire to develop. Further, the results of the analysis of variance revealed that in certain aspects there are significant differences in the identification of development needs of managers. The results and implications of the findings are discussed.

Partnership with an asian family business—What every multinational corporation should know

The family-controlled firm and the state-owned enterprise are the most common ownership structures in Asia. Foreign firms seeking local joint venture partners in Asia will, of necessity, face the prospect of allying with family-controlled firms. Family control in firms creates special concerns that alliance partners should anticipate. Signs of family stability, well-laid succession plans and clearly demarcated professional decision-making represent attractive characteristics for foreign partners. This article will examine the implications of these and other features for alliance partners, using case studies from Indian business. It will also suggest useful sources from which potential partners can obtain information on family-controlled firms.

Overview of contact lens development in China

The population of China is about 1.2 billion. The incidence of myopia is about 30 to 40% but increases to about 60 to 70% among secondary school and university students. Over the past 10 years, contact lenses have become available and have increased in popularity among young people. There are an estimated 2 to 3 million contact lens wearers in China. The number of wearers are increasing at a rate of about 100,000 patients per year. Most of the contact lenses used (96%) are soft. The introduction of the first contact lenses to China is traced to 1947, when hard lenses were imported to Shanghai by Wu Liangcai Spectacle Shop. In 1962, polymethylmethacrylate lenses were produced locally, and in 1972, soft lenses were introduced into China by a local jointventure group. However, contact lenses did not become generally available until 1988, when Beijing Bausch and Lomb, a joint Sino-American venture, introduced 55% water content, 0.035mm-thick spun-cast hydrogel lenses. There was great interest in contact lenses, with practitioners and fitters believing that contact lens fitting and wearing was simple and safe. Since 1988, however, people have learned that contact lenses can be quite harmful to the cornea if used improp-