A strategic analysis of the expected performance of United States firms participating in international joint ventures
Abstract
This study attempts to address the issue whether participation in international joint ventures (IJVs) negatively impacts the long-term economic performance of American firms--as some empirical studies assert it does. More usefully, the study attempts to discover conditions under which U.S. capital markets expect IJVs to create economic value for their respective parents. This study employs the Event study methodology to fulfill its first objective. To fulfill its second objective, this study investigates the influence of variables in the task-related, partner-related, institutional, competitive, and structural context(s) of IJV parents. These influences on performance are integrated within an economics-oriented theory base, which generates eight propositions that are tested within a multivariate regression framework. Above all, the present study finds that, on average, U.S. capital markets expect IJVs to create economic value for approximately 50% of the sample of participating American firms. This figure is nearly constant between the manufacturing and non-manufacturing sector subsamples. Moreover, this study finds support for the hypothesized performance effect of variables in the task-related and structural context of parents. Specifically, business relatedness between a parent and its venture, the pursuit of research and development-oriented activity via IJVs, greater ownership of the venture, and larger firm size, all are found to favorably influence the IJV-based performance of the sample of participating firms. Although this study also finds support for the influence of firm-level competition on performance, the direction of this impact is contrary to that conjectured here. Less--not more--competition decreases IJV-based performance, but the impact of greater competition is statistically insignificant. No support is found for conjectures about the value creating role of institutional variables (similarity between an IJV's partners' national cultures; political risk in an IJV's host country) or variables in the partner-related context of firms (business relatedness between an IJV's parents; previous IJV experience; relative firm size of an IJV's partners).
Degree
Ph.D.
Advisors
Schendel, Purdue University.
Subject Area
Management|Business costs
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