Configurations of Governance Structure, Generic Strategy, and Firm Size: Opening the Black Box of Value Creation In International Joint Ventures

Abstract

To better identify the antecedents of joint venture (JV) performance, we investigate the singular and joint effects of: (1) JV governance structure (shared control; dominant control); and (2) JV competitive strategy (cost leadership; differentiation; hybrid) on stock market expectations of American parents' JV performance. We combine arguments from the JV governance, generic strategy, and organizational studies literatures to delineate the strategy‐structure‐size configurations required for creating superior abnormal returns. In doing so, we also unpack the moderating role of firm size vis‐à‐vis strategy‐performance and structure‐performance relationships. Our efforts contribute to a more sophisticated understanding of the mechanisms for creating shareholder value in American manufacturing firms who participate in international JVs. We generate five hypotheses and find full or partial support for them in our sample of almost 200 international JVs.

Equity Structure of MNE Affiliates and Scope of Their Activities: Distinguishing the Incentive and Control Effects of Ownership

“…A structure that leaves dominant ownership to the local affiliate, however, gives it the discretion to engage in any ADE activities, but it is also likely to limit its access to a broader range of knowledge from the MNE. This is consistent with the finding of Merchant (, this issue) that a shared control structure tends to create greater value when inputs from both parties are critical to the purpose of the JV.…”

Distance Costs and The Degree of Inter‐Partner Involvement in International Relational‐Based Technology Alliances

“…For instance, Lee and Cavusgil () show that relational‐based alliances are more effective in facilitating knowledge transfers and that these alliances require interactions between partners to design and manage them. Merchant (, this issue) also confirms that knowledge transfer between allied partners benefit from a higher degree of partner involvement. Colombo () suggests that the direction and degree of the technology transfer influence the interaction of the partners.…”

The impacts of economic importance difference of a joint venture (JV) held by partners and partners' size difference on the extraction of rivalrous and non-rivalrous private benefits in a JV

“…We make the case here that the size difference between two partners is more likely to enhance the benefits in extracting type 1 private benefits for a smaller partner as well as this smaller partner's costs in extracting type 2 private benefits. In terms of extracting type 1 private benefits, size difference between two partners can create type 1 private benefits for a smaller partner for two reasons: First, researchers often equate firm size with resources (Merchant, 2014;Wright, 1987). Larger firms not only have more resources, but also a wider array of resources and usually, better quality resources (Merchant, 2000).…”

“…Larger firms not only have more resources, but also a wider array of resources and usually, better quality resources (Merchant, 2000). These resourceadvantages associated with larger firms are more likely to benefit a smaller partner when these superior resources are shared in the JV and the smaller partner observes and learns from its larger partner (Merchant, 2014;Canback, Samouel, and Price, 2006). Second, a smaller partner may be more efficient at minimising the cost of realising these available private benefits.…”