Succeeding in International Joint Ventures in Russia: A Finnish Perspective

Abstract

Globalization has increased competition between companies forcing them to reconsider how to maintain their competitiveness. Many Finnish companies have started to expand internationally because of the limited growth possibilities of the local market. One of the target countries has been Russia. International joint ventures (IJVs) have been a popular form of foreign direct investments. However, they are challenging to manage and their failure rates are high. Although research on IJVs is vast, especially research on their performance level is characterized with conflicting results.

The research problem of the study was: “How to succeed in international joint ventures in Russia?” It was approached from the Finnish perspective. The theoretical part of the study began with a discussion on the economic, political, legislative and cultural environment of Russia. Moreover, the development of foreign direct investments in Russia was discussed. In addition, an overview was given on the international joint venture strategy consisting of partner selection, ownership structure, control, trust and dynamics. The main findings of the theoretical chapters were summed up in the theoretical framework of the study and further tested empirically employing a case study method. Three case companies were chosen and data was collected using a combination of a questionnaire and open-ended interview questions.

The empirical part of the study indicated that notable differences between the Finnish and the Russian business environments still exist. What comes to the partner selection criteria, criteria in relation to trust were the only criteria regarded as important by all of the respondents. Considering the ownership structures of the case companies, two of them had developed in a stable way and one dynamically. Moreover, the control structures of the IJVs had developed dynamically. Finnish partners had increased their control over several areas of business as the IJVs had evolved. All in all, this study suggests that the thorough partner selection, fairly high control and trust between partners are the essential determinants of the IJV success in Russia. Moreover, the study indicated that both stable and instable IJVs can be successful in Russia.