An Examination of the Core Dimensions
New Horizons in International Business series
INTRODUCTION International joint ventures stand between the traditional economic co-ordination mechanisms of market and hierarchy. They provide a way of combining the strengths of different firms which is not available in market-oriented exchange relationships but without incurring the disadvantages of a merger or acquisition (Buckley and Casson, 1988; Buchel et al., 1998: 4). In practice, however, IJVs pose extremely difficult challenges to management. Co-operating with another company is a demanding and often unfamiliar task, which may be hindered by the divergence between parent firms with respect to goals, strategies, culture, autonomy and control. A wide variety of motives have been suggested for the establishment of joint ventures (as examined in Chapter 2). The transaction cost approach identifies three inter-linked motives (Buckley and Casson, 1988, following Coase (1937) and Williamson (1975)). These are (i) the existence of net benefits in one or more intermediate markets between the joint venture and the parties’ other operations, (ii) an element of economic indivisibility which results in benefits from avoiding the splitting of the JV into one or more separately owned facilities and (iii) the existence of obstacles to merger. The resourcebased view (Wernerfelt, 1984; Barney, 1991; Grant, 1991) sees links between the internal capabilities of the parent firms where each gains access to others’ internal capabilities without the risk of outright ownership (Hamel et al., 1989; Hamel, 1991; Glaister, 1996, Eisenhardt and Schoonhoven, 1996). Thus capabilities can be leveraged outside the firm in combination with complementary capabilities or competencies (Contractor and Lorange, 1988). IJVs...
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