DETERMINANTS OF INTERNATIONAL JOINT VENTURES SUCCESS: THE ROLE OF PRE-AND POST JOINT VENTURE FORMATION FACTORS (A qualitative study of Finnish IJV in emerging countries)

Abstract

International joint ventures (IJVs) are the most popular way to enter the foreign markets but with significant managerial dissatisfaction in their operations and success. However, there is limited understanding of the key success factors in IJVs. Therefore, the main purpose of the present thesis is to investigate the factors at the pre-formation stage and post-formation stage of IJVs that explain the success of the IJVs. This thesis is based on the theoretical framework by combining theories including social exchange theory (SET), transaction cost economics (TCE) and OLI paradigm.

A qualitative methodology is used to collect data from four case JVs of Wartsila Company in two emerging markets of China and South Korea. Three JVs were operating in China and one JV in South Korea. Findings suggest that forming IJV with a reputable partner, quality of inter-partner communication, inter-partner trust and cultural adaptation between IJV partners are the four most important factors explaining the IJV success. However, remaining factors of flexible contract, equal ownership control, resource complementarity, prior experience, and lack of country risk are also important in explaining the IJV success. But these factors carry less weight as compared to soft factors in explaining the IJV success. These findings will help the managers to better understand the importance of factors enhancing the IJV success.