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Equity Control and the Survival of International Joint Ventures: A Contingency Approach

Published on Jun 1, 2005in Journal of Business Research4.03
· DOI :10.1016/j.jbusres.2003.08.012
Jane W. Lu19
Estimated H-index: 19
(NUS: National University of Singapore),
Louis Hébert7
Estimated H-index: 7
(HEC Montréal)
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Abstract
Abstract This study attends to equivocal results regarding the relationship between equity control and international joint venture (IJV) performance by proposing a transaction-cost-based contingency framework. We examined the moderating effects of asset specificity and uncertainty on the relationship between foreign parent equity control and IJV survival in an empirical setting of Japanese IJVs in 12 Asian countries in the 1985–1996 period. Our findings suggest that in the presence of high asset specificity, high levels of foreign equity control can lead to higher IJV survival rates. Furthermore, we find that social knowledge can serve as a substitute for equity control in IJVs and contribute to higher IJV survival rates.
  • References (42)
  • Citations (96)
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References42
Newest
Published on Jan 1, 2004in Management International Review2.69
Andrew Delios37
Estimated H-index: 37
(NUS: National University of Singapore),
Paul W. Beamish59
Estimated H-index: 59
Abstract * Our evidence from the analysis of performance data on 27,974 foreign subsidiaries challenges conventional notions about joint venture survival rates and financial performance. * This evidence suggests the need for future research to explore why joint ventures survive as well as they do, why wholly-owned subsidiaries have exit rates comparable to joint ventures, and why joint ventures had a level of financial performance at least equal to wholly-owned subsidiaries. Key Results * We fin...
Published on Mar 1, 2002in Journal of International Business Studies7.72
Jane W. Lu19
Estimated H-index: 19
(NUS: National University of Singapore)
This paper compares the predictions of transaction cost and institutional theories in an empirical study of the entry mode choice for 1,194 Japanese foreign subsidiaries. The findings indicate the institutional model adds significant explanatory power over and above the predictions of the transaction cost model. Using the concepts of frequency-based, trait-based and outcome-based imitation, I find support for institutional isomorphism, as later entrants tended to follow the entry mode patterns e...
Published on Mar 1, 2001in Journal of International Business Studies7.72
Yadong Luo64
Estimated H-index: 64
(UM: University of Miami),
O. Schenkar44
Estimated H-index: 44
(OSU: Ohio State University),
Mee Kau Nyaw5
Estimated H-index: 5
(Lingnan University)
This study compares the control-performance relationship for foreign versus local parents in international joint ventures in China. Transaction cost analysis is found more applicable to foreign than to Chinese parents. Both overall and specific controls are associated with performance for foreign parents, while only specific control is for Chinese parents. Under goal incongruity, Chinese parent control is associated with foreign parent dissatisfaction with venture performance, but not vice-versa...
Published on Aug 1, 2000in Strategic Management Journal5.57
H. Kevin Steensma18
Estimated H-index: 18
(UW: University of Washington),
Marjorie A. Lyles37
Estimated H-index: 37
(IU: Indiana University Bloomington)
In this study, we combine social exchange and knowledge-based perspectives to develop a general path model of IJV survival. We further refine our expectations by considering the transitional economic context of our study and the somewhat unique managerial values resulting from the legacy of Marxist ideology. Results from structural equation modeling suggest that an imbalance in the management control structure between the parents leads to parental conflict and an increased likelihood of IJV fail...
Published on Mar 1, 1999in Journal of Economic Behavior and Organization1.40
Joanne E. Oxley17
Estimated H-index: 17
(UM: University of Michigan)
Abstract This study builds on developments in transaction cost economics to examine how institutional environment and transaction (project) characteristics affect governance of inter-firm alliances. The focus is on the choice between equity and contractual alliance forms under differing regimes of intellectual property protection and other national institutional features. Empirical results identify transaction-level characteristics as primary drivers of governance choice in alliances, but intell...
Published on Oct 1, 1997in Journal of Law Economics & Organization1.30
Joanne E. Oxley17
Estimated H-index: 17
(UM: University of Michigan)
Despite the recent proliferation of interfirm alliances designed to govern cooperative efforts in creating or exploiting technology, we have limited understanding of how firms chose among the various alliance types available to them. In this article, I examine the governance properties of different alliance types and develop a simplified market-hierarchy continuum of alliances. This then forms the basis for an empirical examination of appropriability hazards and governance. Strong support for hy...
Published on Sep 1, 1997in Journal of International Business Studies7.72
Jaideep Anand22
Estimated H-index: 22
(UWO: University of Western Ontario),
Andrew Delios37
Estimated H-index: 37
(UWO: University of Western Ontario)
We investigate the effect of firm-specific advantages being ‘local’ in scope, and the influence of subsequent location-specific disadvantages, on the choice of foreign entry mode and subsidiary performance. To look into this issue, we examine Japanese FDI data from the wholesale and retail industries – two sectors that have productive activity concentrated in downstream processes and location-bound resources. Our theoretical and empirical analyses demonstrate that, in situations where required c...
Published on Jan 1, 1997in Academy of Management Review10.63
Andrew C. Inkpen35
Estimated H-index: 35
(ASU: Arizona State University),
Paul W. Beamish59
Estimated H-index: 59
(UWO: University of Western Ontario)
Although the high rate of instability of international joint ventures (IJVs) has been well documented, the underlying reasons for the instability need clarification. In this article, we develop a theoretical framework for instability of IJVs grounded in a bargaining power and dependence perspective. Instability is defined as a major change in partner relationship status that is unplanned and premature from one or both partners' perspectives. The core argument is that the instability of IJVs is a...
Published on Jan 1, 1997in Strategic Management Journal5.57
Anoop Madhok25
Estimated H-index: 25
(UofU: University of Utah)
This paper compares and contrasts the mode of foreign market entry decision from the transaction cost/internalization and organizational capability perspectives. Each of these perspectives operates at a different level of analysis, respectively the transaction and the firm, and consequently differs in the primary arena of attention, namely transaction characteristics and the capabilities of firms. In making the comparison, a key distinction is made between the cost and the value aspects in the m...
Published on Dec 1, 1996in Journal of International Business Studies7.72
Shige Makino24
Estimated H-index: 24
(CUHK: The Chinese University of Hong Kong),
Andrew Delios37
Estimated H-index: 37
(UWO: University of Western Ontario)
Foreign firms in host country environments frequently face location-based disadvantages. This study proposes three means (channels) of overcoming local knowledge disadvantages. Based on a sample of 558 Japanese joint ventures (JVs) located in Southeast and East Asia, we find that partnering with local firms (the first channel) can be a primary strategy for accessing local knowledge and improving JV performance. JV experience in the host country (the second channel) also mitigates local knowledge...
Cited By96
Newest
Published on 2019in International Business Review3.64
Pratik Arte (University of Vaasa), Jorma Larimo15
Estimated H-index: 15
(University of Vaasa)
Abstract Despite garnering an increasing amount of scholarly attention in the past three decades, the literature on foreign divestment is characterised by inconsistent theoretical arguments and mixed findings. In the present paper we review 53 articles on foreign divestment using the content analysis technique. Our aim is to compare and consolidate the main findings of the 53 articles, and provide suggestions for future research. The review suggests that there are several overlapping arguments p...
Published on Jun 1, 2019in International Business Review3.64
Huu Le Nguyen3
Estimated H-index: 3
(University of Vaasa),
Jorma Larimo15
Estimated H-index: 15
(University of Vaasa),
Yi Wang2
Estimated H-index: 2
(University of Southern Denmark)
Abstract This study aims to analyze how parent control strategies affect the degree of innovation in international joint ventures (IJVs) and how different types of innovation strategies - divided into radical and incremental innovation strategies - influence the performance of IJVs. This study uses the most widely adopted definition and operationalization of control in IJVs by Geringer and Hebert (1989), including the three dimensions: mechanisms, focus, and extent of control. These relationship...
Published on Nov 1, 2019in Journal of World Business5.79
Hyoungjin Lee (KU: Korea University), Chris Changwha Chung10
Estimated H-index: 10
(KU: Korea University),
Paul W. Beamish59
Estimated H-index: 59
(UWO: University of Western Ontario)
Abstract This study examines how the composition of subsidiaries’ mandates affects their survival, by investigating the configurational characteristics of mandate portfolios. Examining data from 1991 to 2017 on 14,952 foreign subsidiaries of 4,877 multinational enterprises reveals that while having a mandate portfolio with greater scope in relation to same-parent subsidiaries enhances the survivability of foreign subsidiaries, the effect is weakened when the portfolio has a higher degree of over...
Published on Apr 16, 2019in Journal of International Business Studies7.72
Stefano Elia9
Estimated H-index: 9
(Polytechnic University of Milan),
Marcus Møller Larsen9
Estimated H-index: 9
(CBS: Copenhagen Business School)
+ 0 AuthorsLucia Piscitello17
Estimated H-index: 17
(Polytechnic University of Milan)
We explore when and why decision makers choose international entry modes (e.g., hierarchies or markets) that deviate from internalization theory’s predictions. By applying a cognitive perspective on entry mode decision making, we propose that the performance of prior international activities influences decision makers’ behavior in different ways than assumed in internalization theory. More specifically, due to a representativeness bias, underperforming (overperforming) past ventures influence th...
Published on Apr 15, 2019in European Business Review
Xiaoyu Liu1
Estimated H-index: 1
(Saint Mary's University),
Harrie Vredenburg15
Estimated H-index: 15
(U of C: University of Calgary),
Urs Daellenbach12
Estimated H-index: 12
(Victoria University of Wellington)
Published on Apr 1, 2019in Journal of International Business Studies7.72
Irina Surdu2
Estimated H-index: 2
(University of Reading),
Kamel Mellahi30
Estimated H-index: 30
(Warw.: University of Warwick),
Keith W. Glaister31
Estimated H-index: 31
(University of Leeds)
We investigate foreign market re-entry commitment strategies, namely the changes in the modes of operation (commitment) undertaken by multinational enterprises (MNEs) as they return to foreign markets from which they had previously exited. We combine organisational learning theory with the institutional change literature to examine the antecedents of re-entry commitment strategies. From an analysis of 1020 re-entry events between 1980 and 2016, we find that operation mode prior to exit is a stro...
Published on Jan 1, 2019
Fadia Bahri Korbi1
Estimated H-index: 1
,
Karim Saïd1
Estimated H-index: 1
,
Mourad Chouki1
Estimated H-index: 1
(University of Lorraine)
L’objectif de ce papier est d’analyser le role des artefacts dans la reduction des problemes d’intercomprehension au sein des alliances asymetriques. En nous appuyant sur une etude qualitative fondee sur l’analyse de six cas d’alliances entre des PME tunisiennes et des multinationales europeennes, nous mettons en evidence que des frontieres d’ordre culturel, terminologique, linguistique, managerial, et geographique nuisent a la comprehension mutuelle entre les partenaires. Nos resultats font res...
Published on Aug 1, 2018in Management International Review2.69
Ryan W. Tang3
Estimated H-index: 3
(UniSA: University of South Australia),
Siegfried P. Gudergan20
Estimated H-index: 20
(University of Waikato)
This paper investigates the context in which firms’ ownership strategies in international ventures may be affected by their international experience, which shapes their dynamic capabilities. Based on a statistical synthesis of empirical insights accumulated in a large body of literature, this paper examines multiple firm-, industry-, and country-specific moderators simultaneously. With models tested drawing on data from 102 samples across 114,118 international entry decisions, this meta-analysis...
Published on Nov 20, 2017in Management Decision1.96
Yoojin Oh (Ewha Womans University), Jongkuk Lee7
Estimated H-index: 7
(Ewha Womans University)
Purpose The purpose of this paper is to understand the mechanisms of partner selection from the transaction cost economics’ viewpoint. This paper reveals that a firm’s choice to initiate a new alliance with a new partner or form a repeated alliance with an existing partner depends on contract terms and the relative characteristics of partners. Design/methodology/approach The authors examine 555 alliances in high-tech industries from 2001 to 2009, which the authors collected from secondary source...
View next paperMeasuring Performance of International Joint Ventures