An Examination of the Core Dimensions
- New Horizons in International Business series
Chapter 8: Performance Assessment in IJVs: The Relationship Between Subjective and Objective Methods and the Influence of Culture
INTRODUCTION The motives for international joint venture (IJV) formation include access to markets, cost and risk sharing, economies of scale, and access to new technologies (Contractor and Lorange, 1988; Glaister and Buckley, 1996). These motives indicate that the competitive advantage of the firm is increasingly dependent on the scope of the firm’s co-operative relationships with other firms (Parkhe, 1991). Despite the benefits of co-operation, IJVs have relatively high failure rates (Beamish and Delios, 1997b). This has given rise to a substantial literature on the determinants of IJV performance. One major issue is the appropriate measure of IJV performance. In his comprehensive review of measuring strategic alliance performance, Olk (2001: 5) notes that there is no single view of how to measure organizational effectiveness and that there are challenges in measuring effectiveness that are unique to strategic alliances. Most obviously, alliances are hybrid structures, with somewhat fuzzy boundaries which makes performance evaluation more difficult. Furthermore, there are multiple members – an IJV system has at least two partners and (usually) an IJV management – with no clear basis for evaluating the range of interests. These features add to the already complex issue of how to evaluate performance. Consequently, there is no consensus on the appropriate definition and measure of IJV performance. Early studies of IJV performance used a variety of financial indicators such as profitability, growth and cost position, or objective measures of performance including survival of the IJV, its duration, instability of (significant changes in) its ownership, and renegotiation of the IJV...
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