International Joint Ventures and Alliances Term Paper

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The study also found that there is an inflexion point of IJV shared performance in industries that have initially large technology gaps. As emerging firms approach greater parity of technology use, closing the gap with their peers and the IJV partner, the greater the reliance and dependence on the IJV partner becomes. The two hypotheses of the study theorize that there is an inverted U-shaped curve of influence between IJV partners and nascent firms, meaning the greater the dominance of the IJV partner and depth of technology, the less likely an emerging firm will stay autonomous. The first hypothesis stated that a U-shaped curve of influence indicates both a negative and positive contribution to indigenous firm's innovation and autonomy. Maintaining an equilibrium of influence by industry mitigates the negative aspects of IJV influence while ensuring indigenous firms get just enough support without making them too dependent.

The second hypothesis is that IJVs will be more effective in ensuring emerging firms' autonomy in low technology gap industries vs. high technology gap ones. The greater the technology gap in an industry and the farther behind an indigenous Chinese firm is from industry norms of market performance, the greater the reduction in innovation and risk taking. IJVs in low technology gap industries have a higher elasticity of effect on innovativeness in indigenous Chinese firms. Conversely, IJVs that exist in high technology gap industries show a lower elasticity of effect on innovativeness; there is a greater risk of becoming very dependent on an IJV partner in rapidly changing, turbulent high technology industries.

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Too much reliance on IJV alliances in high technology industries invariably leads to a lack of innovation and R&D in product design, branding, messaging and taking risks building new, often foreign, distribution channels. The second hypothesis a definite elasticity of influence around the U-shaped curve, with greater elasticity in low growth industries relative to high growth ones. The impact of global IJV partners in low-gap industries is more immediate and direct given the high level of influence elasticity.

The one counterintuitive finding however is that the age or duration of the IJV alliance or partnership had no effect on the success or failure of the ISV alliance and partnership. Managers of emerging firms in growing markets who are often sought out by multinational corporations wanting access to their markets in exchange for an IJV alliance, the costs of these alliances need to be considered more than the benefits. Second, IJV alliances and partnerships should never be structured like an acquisition by the larger firm. Third, the authors mention the absorptive capacity of a firm to assimilate and use technology and market knowledge. This needs to be accentuated and managed within the context of strategic goals and objectives first.

Reference

Li, J., & Zhou, C.. (2008). Dual-edged tools of trade: How international joint ventures help and hinder capability building of Chinese….....

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