International Joint Venture part 1 Essay - 4,113 words

International Joint Venture IJVs (International Joint Ventures) have increased significantly in popularity in recent years (Beamish and Delios 1997) as firms find themselves under more pressure to expand internationally, to be competitive. However, international joint ventures (IJVs) continue to be challenging to manage and, as a result, often lead to failure. In a meta-analysis of 12 past studies of IJVs, Beamish and Delios (1997) found that the performance of between 32 and 61 percent of the IJVs' in each sample was unsatisfactory. Consequently, both managers and academics are keenly interested in what firms can do to increase their IJVs' chances of success. One of the most common reasons given for IJVs not performing well is difficulties between parent firms. It is therefore essential to consider how such difficulties can be avoided. One hypothesis is that the more dissimilar parent firms are, the more likely they are to experience difficulties with their joint venture. Several authors have suggested, but not tested, that interfirm diversity can severely impede the ability of companies to work together effectively (Harrigan 1988a; Parkhe 1991; Perlmutter and Heenan 1986). One way of measuring dissimilarity is to examine how firms' organizational climates differ.


This is the approach chosen in this study, which focuses on the relationship between the dissimilarity in organizational climate between the parent firms and the joint venture organization (JVO) and the performance of the joint venture. The importance of inter-firm organizational culture/climate similarity for firms involved in joint ventures has received little systematic attention in the literature. Some IJV researchers have alluded to the drawbacks of organizational culture/climate dissimilarity by suggesting that it is beneficial for the parents of an IJV to have similar organizational climates in order to obtain optimal IJV performance (e.g. Geringer 1988; Parkhe 1991; Simiar 1983). However, we are not aware of any past research that has systematically empirically investigated this issue. This study seeks to help fill this void.


Throughout the paper, the term joint venture organization (JVO) will be used to refer to the joint venture, excluding the parents. This is in contrast to our use of the terms IJV and JV, which we use to represent the JVO and its parents. As discussed in the methodology section, this study is limited to IJVs with two parents. The decision to focus on the importance of organizational climate similarity between parent firms and the JVO derives from three exploratory studies which investigated success strategies for Russian international joint ventures -- RIJVs. The studies were conducted to determine which relationships were important, rather than to test the importance of specific relationships. The studies involved interviews with general managers from 42 Russian international joint ventures (RIJVs). In some cases, other managers from the JVO and parent firms were also interviewed. The importance of organizational climate similarity between parent firms and the JVO was one of the key success factors alluded to most frequently during these interviews. The central goal of this paper is to determine the advantages and disadvantages of forming an International Joint Venture.


Russia provides a good location to investigate this question, since IJVs in Russia are often a meeting place for parent firms with diverse organizational climates. The paper first reviews the literature on Russian international joint ventures and then compares and contrasts the organizational climate and organizational culture literatures. Next, the variables used in the study are discussed, followed by an explanation of the methodology used. The results are then presented and discussed. The paper concludes with topics for further study. Russia's transformation to a market economy has not been easy.


However, with vast natural resources, a well-educated and inexpensive labor force, and 150 million people, Russia has nevertheless attracted the attention of foreign firms, despite high risks. The risks include organized crime, intractable bureaucracy, uncertain legislation, an arbitrary tax system, and an unstable political and economic system. These environmental factors are characteristics of the market place and are difficult for any single company to influence. In contrast, this paper seeks to examine the influence of a factor which firms can affect, the importance of organizational climate similarity. Several authors have conducted studies on Russian international joint ventures (they are largely small-sample, explorative/descriptive studies). Fey has conducted several studies relating to Russian IJVs which have investigated success strategies, design characteristics, key success factors, and managing conflict. Other authors have also made important contributions to our understanding of Russian international joint ventures (RIJVS). Ralston provided eight recommendations for IJV success based on interviews with managers from 16 RIJVs, and Cattaneo investigated how to avoid typical problems which arise.


Lawrence and Vlachoutsicos (1993) wrote an important Harvard Business Review article based on several case studies, which suggested the importance of giving the RIJV a lot of autonomy due to the dynamic environment and the importance of utilizing local managerial talent. Sherr and Pettibone suggested useful negotiation strategies when trying to form an RIJV and McCarthy provided a historical examination of the experience of 40 firms in Russia (which included using RIJVs) and described the future plans of these foreign firms. Hertzfeld (1991) described how vertical integration can be beneficial for RIJVs. Finally, Nigh and Smith (1989) investigated how foreign firms are managing political risk in RIJVs and Nigh et al. (1990) described the basic design characteristics of RIJVs. Before turning explicitly to the literature dealing with organizational climate, it is worth considering the differences between organizational climate and organizational culture, because they are closely related constructs and the term organizational culture is currently more popular than organizational climate. Though a few authors have compared and contrasted the organizational climate and culture literatures (e.g.


Denison 1990; Denison 1996; Schneider 1990; Schwartz and Davis 1981), most researchers have ignored the similarities and differences between organizational climate and organizational culture. Organizational culture has traditionally focused on the unique aspects of a particular social setting, and has thus relied on qualitative methods. In contrast, organizational climate has explicitly focused on comparisons between different social settings and thus has traditionally used quantitative methods. Organizational climate researchers have normally placed greater emphasis on observable practices of the organization, while organizational culture researchers have traditionally placed more emphasis on the values of the organization. Also, compared to organizational climate, organizational ...................................................................................................................................................................................................................................................................................................................................................................

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Essay Tags: organizational, organizational culture, joint venture, climate, venture

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