International Joint Venture Termination Research Articles

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

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.

Happily (N)ever after: An empirical examination of the termination of IJVs across emerging versus developed markets

Research on international joint ventures (IJVs) has paid increasing attention to the context of emerging markets (EMs). While the intersection of the IJV and EM research streams has grown, it has overlooked the effects of the partner firm home country and IJV host country context on the IJV outcome. In this study, we develop a typology of IJVs based on home and host countries as either developed or emerging markets to address this gap. Using a dataset of 24,011 IJVs in 48 countries between 1995 and 2017, we examine the impact of partners’ home countries, the IJV host country, and their interactions on the likelihood of IJV termination. Our findings reveal that beyond the frequently examined partner-, IJV-, and host country-related factors in prior research, the context of IJV partners’ home countries, the IJV host country, and their interactions significantly matter for IJV termination.

Partner Substitutability and International Joint Venture Termination: A Partner Interdependence View

Previous studies have largely focused on the decisions of multinational partners when investigating the stability of cross- border interorganizational relationships, but ignored the importance of local partners, assuming that multinational firms often have certain advantage over local firms. From an interdependence perspective, we argue that for international joint ventures (IJVs), post-formation alliances activities by both multinational and local partners, which make the focal IJV substitutable, may lead to the instability and termination of the focal IJV. Moreover, post- formation alliances activities by both multinational and local partners can accelerate the IJV termination. However, when IJVs involving higher levels of technology transfer complexity, the mutual dependence of multinational and local partners increases and thus the negative effects of their post-formation alliances activities on IJV survival diminish. We test our theory using data on 841 IJVs formed by 763 local firms and 714 multinational firms from 1990 to 2018 in a multi-country context. Our results show supports to our ideas.

Explaining alternative termination modes of international joint ventures

PurposeThe authors combine options logic with transaction cost economics to explain why firms maintain, divest or buy out their international joint ventures (IJVs). It is suggested that a decline in environmental risk and higher partner-related risk makes a firm more likely to acquire an IJV but less likely to divest an IJV. The study also investigates how IJV age moderates the effects of a decline in environmental risk and higher partner-related risk.Design/methodology/approachThe study employs competing risks analyses to examine the drivers of different termination outcomes using a dataset consisting of 459 IJVs in the People's Republic of China, of which 110 were either acquired or divested by their foreign parent.FindingsThe study finds that changes in environmental risk and partner-related risk affect how firms terminate their IJVs in the People's Republic of China. Specifically, the authors find that the effect of exogenous and endogenous risk are more pronounced for the acquisition of IJVs than for the divestment of IJVs.Research limitations/implicationsThe study contributes to international marketing research by complementing options logic with transaction cost economics to provide a theoretical explanation of the different ways in which IJVs in the People's Republic of China are terminated.Practical implicationsIJVs continue to be an important yet often unstable method to serve international markets. Our findings increase managers' awareness of the effect that two important sources of risk may have on the termination of IJVs in the People's Republic of China.Originality/valueThe study provides novel insights into the effect that changes in exogenous and endogenous risk have on a firm's choice of termination mode drawing on novel data on the different ways in which foreign firms have terminated their IJVs in the Peoples' Republic of China.

Factors affecting the choice of interaction after the international joint venture termination in Africa: Total interpretive structural modeling

AbstractThe choice of interaction after the international joint venture (IJV) termination is influenced by different factors in varying levels that can be hierarchically depicted. On IJV termination, parent firms are deprived of value created during IJV. Parent firms can attempt to create a whole or part of the value created during IJV through an interaction post IJV termination. This study attempts to identify factors that influence the choice of interaction post IJV termination and categorize them hierarchically based on their magnitude of influence. This study examines the factors that influence the decision to interact post IJV termination by developing a total interpretive structural model (TISM) using data collected from managers of terminated IJV in Africa.

Global marketplace strategy and choice of interaction after termination of international joint venture

AbstractForeign partner's global marketplace strategy significantly influences the choice of interaction after international joint venture (IJV) termination as supplier–buyer, complement, or competitor between terminated IJV partners. The domestic partner in IJV enables foreign firms to pursue its global marketplace strategy—transnational, multidomestic, global, or international. On IJV termination, foreign partner's perceived value creation from IJV shall be rendered void and is required to either look for a new domestic firm to collaborate or form an interaction after IJV termination with IJV's domestic partner. This study examines the role of foreign firm's global marketplace strategy on the choice of interaction after IJV termination as supplier–buyer, complement, or competitor using data on terminated two partner IJV headquartered in India.

Bounded Reliability and the termination of international joint ventures – insights from the Mid-Med Bank, 1975–1979

In the late twentieth century, the international joint venture (IJV) became an increasingly important yet unstable organisational form of international business. Based on insights provided by the Mid-Med Bank of Malta during the period 1975-1979, this article argues that the unanticipated termination of IJVs has endogeneity due to the bounded reliability of their partners’ decision makers, developed from the formative stage and influenced by inter/intra organisational relationships along the evolution of the IJVs. The findings thus contribute to our understanding of the nature of bounded reliability, contractual governance and the bargaining process.

Post termination interaction in international joint ventures (IJV)

PurposeThis paper aims to explore dynamics of post termination interaction between international joint venture (IJV) partners and empirically examines IJV level and dyad level factors that influence the choice of post IJV termination interaction as supplier, complement or competitor.Design/methodology/approachIn-depth literature review is undertaken to identify IJV and dyad level that could influence the choice of post termination interaction between terminated IJV partners. Hypotheses are empirically validated using multinomial logistic regression on data collected on terminated IJV headquartered in India.FindingsThe results denote that the choice of post-IJV termination interaction between IJV partners as supplier, complement or competitor is influenced by interdependence, bargaining power, foreign partner’s purpose of IJV, complementarity and type of IJV termination.Research limitations/implicationsThis paper explores an under researched area in extant IJV literature that could be taken up for study by academicians. The paper upholds and strengthens the dynamic capabilities view of strategic management in IJV context.Practical implicationsThis paper examines a practice adopted by businesses in emerging markets and determines important factors that influence the choice of interaction post IJV termination between partners. Practitioners will be encouraged to understand and plan post termination dynamics with their terminated IJV partner.Originality/valueThe paper undertakes examination of a practical business phenomena, i.e. interaction post termination between terminated IJV partners.

Purpose of international joint venture and interaction post termination

International joint ventures (IJV) are a prominent mode to enter and exploit a new market and have attracted several researchers to explore various phases and actions undertaken in IJV. Few studies in the literature discuss the effect of IJV experience on parent firms interaction post termination of their IJV. This study attempts to explore the effect of purpose of IJV for domestic and foreign firms - resource seeking, capital seeking, market seeking and strategic asset seeking on the choice of interaction post IJV termination as supplier-buyer, complement or competitor. Empirical analysis is conducted on data of 180 terminated two-partner IJVs headquartered in India during 2000-2016 time period using multinomial logistics regression (MLR). Results suggest that both the domestic firm's and the foreign firm's purpose of IJV influences the choice of interaction post IJV termination.

Purpose of international joint venture and interaction post termination

International joint ventures (IJV) are a prominent mode to enter and exploit a new market and have attracted several researchers to explore various phases and actions undertaken in IJV. Few studies in the literature discuss the effect of IJV experience on parent firms interaction post termination of their IJV. This study attempts to explore the effect of purpose of IJV for domestic and foreign firms - resource seeking, capital seeking, market seeking and strategic asset seeking on the choice of interaction post IJV termination as supplier-buyer, complement or competitor. Empirical analysis is conducted on data of 180 terminated two-partner IJVs headquartered in India during 2000-2016 time period using multinomial logistics regression (MLR). Results suggest that both the domestic firm's and the foreign firm's purpose of IJV influences the choice of interaction post IJV termination.

Match-Making in International Joint Ventures in Emerging Economies: Aligning Asymmetric Financial Strength and Equity Stake

This paper attends to prior equivocal results concerning partner asymmetry and international joint venture (IJV) performance. More specifically, we examine how asymmetric financial strength between the partners influences IJV termination in emerging economies, and consider the asymmetry direction as well as the local partner’s equity stake as contingency factors. Our event history analysis of 119 IJVs formed in Brazil shows that asymmetric financial strength increases the likelihood of termination. However, notably, the findings reveal that higher local partner financial strength is less harmful to IJV performance than lower local partner financial strength. Moreover, under both conditions, IJV performance is better when the highest equity stake is attributed to the local partner.

The termination of international joint ventures: Closure and acquisition by domestic and foreign partners

We study different modes of terminating international joint ventures, namely closure and acquisition, and find that different forces govern the two termination modes. Decisions regarding asset specificity and the size of the venture affect the likelihood of closure, but not that of acquisition. In contrast, full acquisition by one of the partners is related to history of the venture before the joint venture was formed, to decisions made at the time of the creation with respect to equity split between partners, and to subsequent changes of these initial decisions. Joint ventures that were created de novo are more likely to be closed down than those that were previously fully owned by one of the parties. The proportion of equity initially held by each partner and subsequent increases in this proportion increase the likelihood of the venture being fully acquired by that partner.

Rigor and Relevance of IJV Exit Research

International Joint Ventures (IJVs) are a well acknowledged and frequently implemented organizational mode, especially with regard to international market entry strategies, yet they are also prone to conflicts of interests, drawbacks, inefficiencies, and enduring losses. Past research has consequently been dominated by studies that have attempted to identify success factors for managing IJVs based mainly upon archive data. Success or failure is frequently defined on the basis that IJVs have ‘disappeared’ from the data-set. The term IJV-‘exit’ has become the byword for closing down ineffective, failing IJVs while neglecting the fact that such a disappearance may indicate success if, for instance, the initial objectives of partners have been achieved. Beyond such misconceptions, there is no stock-take of what is known about the different types, measures, contexts, and determinants of IJV exit to take research to the next stage. This paper fills this research gap by comprehensively analyzing the IJV exit literature as an integral part of IJV research, while focusing on studies that either apply IJV termination or IJV longevity as a measure of IJV exit. A systematic overview of the contexts and determinants that influence IJV exit is provided. Furthermore, the rigor and relevance of the existing IJV exit literature is evaluated in terms of its methodological, conceptual and theoretical foundation, and major implications for directing future research are proposed.

Cluster Formation by Foreign Firms in Emerging Economies and International Joint Ventures

This study investigates factors that influence the termination of an international joint venture (IJV) and examines how the resulting wholly owned subsidiary’s (WOS) proximity to its previous partner can promote cluster formation in an emerging economy. The author uses a game-theoretic approach with complete information to demonstrate how the post-IJV cluster formation process is based on the cluster type to be formed—symmetrical or asymmetrical. The author also describes conditions under which government subsidies may be necessary to encourage the IJV termination and WOS formation to support cluster formation, as well as conditions where they are not required or could be counterproductive.

Intended and unintended termination of international joint ventures

AbstractThis study proposes that international joint ventures (IJVs) are terminated either when the initial purposes of the formation of the IJV have been achieved (intended termination), or when unanticipated contingencies that emerge in the external, internal, or inter‐partner conditions after the establishment of the IJV impede the continuation of its operation (unintended termination). Our study examines the factors that affect intended and unintended termination and the longevity of IJVs. The findings show that approximately 90 percent of all IJV terminations are unintended and 10 percent intended, and that the frequency of intended termination and unintended termination varies noticeably depending on the initial purposes of formation. This suggests that the termination of IJVs is significantly contingent on their formation. The findings also show that the longevity of IJVs varies according to the initial purposes of formation, the initial conditions under which the IJV is formed, and the types of unanticipated contingencies that it encounters. The key theoretical issues and practical implications of the distinction between the intended and unintended termination of IJVs are also discussed. Copyright © 2007 John Wiley & Sons, Ltd.

Parent Firm Performance across International Joint Venture Life-cycle Stages

The benefits that firms obtain from investing in international joint ventures (IJVs) can be reinforced or reduced by the management of later stages of collaboration. This paper presents an analysis of the shareholder wealth effects of IJV formation and five types of IJV termination. The empirical findings challenge common assumptions in the IJV literature, contrast prior evidence on the performance implications of market entry and exit through acquisitions and divestitures, and demonstrate the value of integrating IJV life-cycle stages in future research.

The dynamics and effectiveness of international joint ventures

This article addresses the instability of international joint ventures (IJVs) from a corporate strategy perspective. Data on 272 terminated IJVs are presented by way of illustration. The empirical patterns demonstrate IJV termination most often involves a reallocation of IJV ownership between existing parent firms, and these changes in ownership and resource commitments are a function of both firms' relationships to the venture. The article submits the transitory character of IJVs often stems from the nature of parent firms' strategic intents when forming IJVs. This suggests IJV instability is not always tantamount to collaborative failure as is widely assumed.