Chapter 6: International Joint Ventures
with Peter J. Buckley 6.1 INTRODUCTION In a global environment, participation in an international joint venture (IJV) is an important strategic option (Beamish and Banks, 1987). Explicit assumptions are particularly crucial when studying IJVs. No IJV, however conﬁgured, performs perfectly, and so to understand why an IJV is chosen it is necessary to understand the shortcomings of the alternatives. Moreover, IJVs are conﬁgured in many different ways, and different conﬁgurations are associated with different kinds of behaviour (Tallman, 1992). When the ﬁrm’s objective is proﬁt-maximization, the choice of any strategy, such as an IJV, is driven by the structure of revenues and costs. This structure is determined by the ﬁrm’s environment. By identifying the key characteristics of this environment, the ﬁrm’s behaviour can be modelled in a very parsimonious way. The predictions of the model emerge jointly from the proﬁt-maximization hypothesis and the restrictions imposed by the modeller on the structure of revenues and costs. Predictive failure of the model is addressed by re-examining these restrictions and not by discarding the maximization principle which is at the core of the theory (Buckley and Casson, 1988). The variables entering into the theory do not have to be of a strictly economic nature. The criterion for inclusion is that they can be analysed from a rational action point of view. The modelling of IJVs illustrates this very well. A wide range of factors impact upon IJVs (Geringer and Hebert, 1989): not just traditional economic factors, such as...
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