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Multiparty cooperation and performance in international equity joint ventures

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An Erratum to this article was published on 16 July 2004

Abstract

Previous studies have examined the relationship between cooperation and performance in international equity joint ventures (EJVs), mostly at the partner level. This study revisits the issue at multiple levels, and considers vertical and horizontal cooperation among the foreign partners, the local partner, and the venture management team. The study also examines how goal incongruence between partners and market uncertainty affect the tripartite relationships between cooperation and performance. The test results show a strong positive impact of cooperation between partners on performance as perceived both by the partners and by the venture management team. One partner's cooperation with the venture management team is perceived favorably by that party but not necessarily by the other party unless both partners share the same goal. Market uncertainty requires stronger cooperation at all levels to improve performance in EJVs.

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Notes

  1. We are greatly indebted to Departmental Editor Brian Silverman for this insight.

  2. James et al.'s (1984, 88) convergence index is calculated as

    where MS xj 2 is the mean of the inter-rater variances on the J items (J=9 for the cooperation construct, and 6 for the performance construct) and σeu2 is the variance on the measurement scale.

  3. Our first factor analysis (using varimax rotation with three factors), which focused on multi-item cooperation, reported three factor loading patterns that clearly differentiate between EJV managers' own responses (loadings 0.83–0.91), foreign parent cooperation perceived by EJV managers (0.64–0.84), and Chinese parent cooperation perceived by EJVs (0.76–0.89). Our second factor analysis, which focused on performance, also showed three clear loading patterns that distinguish between EJV own satisfaction (loadings 0.79–0.88), foreign parent satisfaction perceived by EJVs (0.69–0.84), and Chinese parent satisfaction perceived by EJVs (0.68–0.88).

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Author information

Authors and Affiliations

  1. Department of Management, University of Miami, Coral Gables, USA

    Yadong Luo

  2. CEIBS/Rutgers University, Shanghai, China

    Seung H Park

Authors
  1. Yadong Luo
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  2. Seung H Park
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Corresponding author

Correspondence to Seung H Park.

Additional information

Accepted by Brian Silverman, Departmental Editor, 18 November 2003. This paper has been with the author for two revisions.

An erratum to this article is available at http://dx.doi.org/10.1057/palgrave.jibs.8400097.

Appendices

Appendix A. Summary of survey items for key constructs

Cooperation

Based on your experience over the last 3 years with the EJV, please rate the degree to which the following managerial situations characterize the cooperative relationship between: (a) the Chinese parent(s) and the foreign parent(s), (b) the Chinese parent(s) and the EJV's management, and (c) the foreign parent(s) and the EJV's management. (Responses are based on a four-point Likert scale in each of the following items for each cooperative relationship, that is, (a), (b), and (c).

  1. 1)

    We decide together on the strategic objectives and goals of the EJV.

  2. 2)

    We are ready to give in to enable the EJV to achieve its goals as stated in the contract.

  3. 3)

    We decide together on the distribution of authority between them in the EJV.

  4. 4)

    We work together to establish rules and regulations concerning the EJV's operation.

  5. 5)

    We participate together in professional committees in different domains (e.g. production, marketing, personnel, budgeting).

  6. 6)

    We value reaching consensus in decision-making at the board level.

  7. 7)

    We follow mutual consultation in cases of uncertainty.

  8. 8)

    We select senior EJV managers together.

  9. 9)

    We decide together to resolve issues in executing new plans (e.g. product mix, new technology development, entrance to new markets).

Performance

Please rank your satisfaction and your perception of that of the parent companies in the most recent year with each of the following items. (Responses are based on a five-point Likert scale for each party, that is, EJV management, foreign partner, and local partner. The survey includes more items than are reported in the paper.)

  1. 1)

    Sales growth.

  2. 2)

    Market share.

  3. 3)

    Profitability.

  4. 4)

    Cost control.

  5. 5)

    Technology development.

  6. 6)

    Manufacturing/quality control.

  7. 7)

    Customer service and satisfaction.

  8. 8)

    Distribution network and efficiency.

  9. 9)

    Organizational reputation and product image.

  10. 10)

    Overall performance.

Goal incongruence

In the following table, please give your opinion on the objectives the Chinese and foreign partners had in establishing the EJV. (Responses are based on a five-point Likert scale for each partner, categorized from ‘irrelevant’ to ‘to a very great extent’.)

  1. 1)

    Generating profits.

  2. 2)

    Taking advantage of investment incentives offered by the Chinese government.

  3. 3)

    Local market expansion.

  4. 4)

    Technology transfer.

  5. 5)

    Developing R&D capabilities.

  6. 6)

    Cost reduction.

  7. 7)

    Access to global marketing network and know-how.

  8. 8)

    Export growth.

  9. 9)

    Access to financial resources.

  10. 10)

    Risk reduction.

  11. 11)

    Opportunity to join forces with competitors.

  12. 12)

    Learning management and production skills.

  13. 13)

    Opportunity to employ skilled personnel.

Appendix B

See Table B1.

Table a1 Descriptive statistics of cooperation and performance by the EJV management (n=250)
Full size table

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Luo, Y., Park, S. Multiparty cooperation and performance in international equity joint ventures. J Int Bus Stud 35, 142–160 (2004). https://doi.org/10.1057/palgrave.jibs.8400072

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