The influence of institutional pressures on IJV partner relationships post market exit

Abstract

International Joint Ventures (IJVs) have been an instrumental strategic choice in helping Multi-National Enterprises (MNEs) internationalise and expand their geographical operations. IJVs have typically been formed to increase a firm’s competitive advantage and to help partners overcome the liability of foreignness in a new market. However, they have also been characterised as difficult to manage. The reasons for complexity vary and can include challenges resulting from partner collaboration, disputes over ownership, and strategic misalignment. Though one key aspect leading to complications that is often not accounted for are institutions. As IJVs operate across several institutional contexts, they have to navigate layers of institutional structures and pressures, which add to the complexity of their operations and, therefore, increase the intricacy in managing them.

Institutional pressure can create uncertainty and can lead to IJVs re-strategising and re-organising their operations, including exiting unfavourable markets. While market exits are an important strategic option for firms, they are often viewed negatively. In widespread industry and academic literature divestment has been seen as an important strategic option, which often occurs as a process of a firm’s natural growth and maturity process, though there is still the lack of a comprehensive theoretical framework. It is generally agreed that uncertain business conditions can strain IJV partner relationships and lead to conflict within the partnership. Therefore, it is important understanding how partner relationships are impacted by institutional pressures specifically after a major market exit. It is also important to understand how institutional pressures can impact IJVs that have underlying challenges, specifically after they have undergone a market exit.

This study examines the IJV between Renault and Nissan, specifically focusing on their relationship after their exit from the Russian market in 2022 after sanctions were imposed on Russia in February 2022 by both the French and Japanese government. Using a combination of archival data analysis and semi-structured interviews, the Renault-Nissan case is reviewed over its tenure to understand how the relationship evolved and what led to the renegotiations. The findings suggest that institutional pressure has acted as a catalyst in Nissan’s decision to renegotiate the terms of the IJV, however, the relationship had suffered from deteriorating trust. Trust in the relationship has primarily been impacted by opportunistic and counterproductive activities over the years, secondly a lack of equitable profitability has also led to a need to renegotiate.