Managing international joint ventures to improve performance : The role of structural and social mechanisms

Abstract

Poor performance has been a major concern in research on international joint ventures (IJVs). This study integrates the IJV management mechanisms from transaction cost theory (TCT) and social exchange theory (SET) in order to gain insights into management mechanisms that improve IJV performance. The framework consists of three structural (i.e., symmetric dependence, symmetric equity share and resource complementarity) and three social (i.e., trust, communication and cultural adaptation) IJV management mechanisms, which are considered as potential determinants of IJV performance. Based on the analysis of data collected from 89 IJVs established by Nordic firms in Asia, Europe and the USA, results indicate that TCT-based symmetric dependence and resource complementarity on the one hand and SET-based trust, communication and cultural adaptation on another significantly improve IJV performance. However, impact of symmetric equity share on IJV performance remains negative and non-significant, explaining that IJV partners may consider it rather a safeguard to their own stake and interests in IJVs. In addition, SET-based IJV management mechanisms are found to be more effective than the TCT-based IJV mechanisms in improving IJV performance.