Number of partners and JV performance
Section snippets
Background research
Equity JVs are a frequently used organizational form, particularly for firms making direct investments in foreign countries (Emmott, 1993, Jalilian, 1996, Yu & Tang, 1992). We define equity JVs as ventures where two or more partners establish a separate organization in which each partner holds a minimum equity stake of 5% (Killing, 1983). IJVs allow firms to better deal with pressures related to efficiency and flexibility (Powell, 1987). The complex structure of a JV, while potentially
Theory and hypotheses
Research on the relationship between the number of partners and JV performance has either taken an agnostic approach with respect to theory (e.g., Hu & Chen, 1996) or made the assumption of a negative relationship between performance and number of partners (e.g., Park & Russo, 1996). Van de Ven (1976) provides an explanation that renders some insight into why performance may decrease as the number of partners in a JV increases. He states that as the number of partners increases, there is a
Sample
The four hypotheses were tested using a sample of 1,335 Japanese JVs established in 73 countries before 1997. The sample was derived from information published in three editions of Kaigai Shinshutsu Kigyou Soran (Toyo Keizai, 1989, 1992, 1994, 1997). This directory is compiled annually from public information as well as a survey of top-level Japanese managers in foreign subsidiaries. The coverage of the survey is extensive, and the publication is a valid source of data for the study of Japanese
Model estimation and fit
Several logistic regressions were run. The results for the full sample model (Model 1) are found in Table 8. Here, the overall χ2 statistic, 68.955, is significant (p<0.01) which indicates that the model distinguishes well between high and low performing JVs. More specifically, the variables in Model 1 correctly classify 80% of the IJVs, which represents an improvement of 12% over the random classification rate, indicating good explanatory power and predictive abilities.
For Model 2, the χ2
Discussion
This study found that number of partners does not affect JV performance. This result is important as it provides evidence regarding an important question for multinational enterprises contemplating the use of JVs, and for researchers. Many authors who have used transaction cost logic to understand multi-partner JVs (Cartwright & Zander, 1968; Park & Russo, 1996; Parkhe, 1993a), have reasoned that multi-partner JVs will not perform as well as two-partner ventures because of the myriad of
Acknowledgements
Financial support from the Social Sciences and Humanities Research Council of Canada is gratefully acknowledged. The authors would like to thank Professor Andrew Delios for his comments on an earlier version of this paper.
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