learning to manage international joint ventures

International Business Review 12 (2003) 83–108www.elsevier.com/locate/ibusrev

Learning to manage international joint ventures

Keith W. Glaister∗, Rumy Husan, Peter J. BuckleyCentre for International Business, Leeds University Business School, University of Leeds, Maurice

Keyworth Building, Leeds, LS2 9JT, UK

Received 16 February 2000; received in revised form 1 May 2001; accepted 24 March 2002

Abstract

This paper identifies the key lessons of managing international joint ventures (IJVs) fromthe perspectives of IJV experienced partners and managers. The study adopts a multi-methodpersonal interview and self-administered questionnaire approach to identify the major manage-ment lessons. Broadly, the response categories are grouped into three distinct areas of learning:(1) the management of the IJV formation process; (2) management of the boundary relationshipbetween partners; and (3) the management of the operation of the IJV. The paper elucidatesthe lessons regarding these three areas of IJV management and provides a set of propositionsfor future research. 2003 Elsevier Science Ltd. All rights reserved.

Keywords: Learning; International joint ventures; Formation process; Boundary relationships; Oper-ational management

1. Introduction

Increasingly, knowledge is considered a vital ingredient in competitive success.As the integration of global markets intensifies competition, companies must devotemore attention to ways of acquiring the knowledge resources that they need. Withconstantly shifting technologies, products and processes, competitive advantage mayrest on the ability of a company to learn and diffuse accumulated knowledge through-out the organisation (Choi & Lee, 1997; Garratt, 1987; Lynn & Rao, 1995; Nonaka,1991, 1994; Spender, 1994). In this context the possibility of using co-operative

∗ Corresponding author. Tel.:+44-113-233-2633; fax:+44-113-233-2640.E-mail address: [email protected] (K. Glaister).

0969-5931/03/$ - see front matter 2003 Elsevier Science Ltd. All rights reserved.doi:10.1016/S0969-5931(02)00089-6

84 K. Glaister et al. / International Business Review 12 (2003) 83–108

strategies, especially international joint ventures (IJVs) as instruments for gainingknowledge is being more readily acknowledged (Inkpen, 1995; Lyles, 1988).

The importance of learning within organisations has long been considered animportant determinant of technological progress and the raising of efficiency andproductivity. Child and Faulkner (1998, p. 287) maintain that the ability to learn isprobably the most important intangible asset that a company can possess. In themainstream economics literature the phenomenon of ‘ learning by doing’ (that is,increases in output without additional investment) was formally elucidated in the1960s by Arrow (1962), Levhari (1966), and Sheshinski (1967). More recently, thelearning process in organisations has been examined within the realms of organis-ational theory and strategic management (Huber, 1991). This literature focuses notonly on the outcomes of learning but also on the processes of learning, that is, onthe methods used by firms to utilise knowledge and develop organisational efficiency.Principally, this is done through more effective use of skills in order to achieve theoutcome of raising productivity or retaining or enhancing competitiveness(Dodgson, 1993).

A number of types of learning have been postulated including, higher and lowerlevel of learning (Fiol & Lyles, 1985), generative and adaptive learning (Senge,1990), strategic and tactical learning (Dodgson, 1991) and single-loop, double-looplearning (Argyris & Schon, 1978) that involves detection and correction of errors(for an elaboration of these concepts, see Dodgson, 1993).

Although IJVs provide a vehicle for learning, and while alliances create value(Chan, Kensinger, Keown, & Martin, 1997; McConnell & Nantel, 1985), Anand andKhanna (2000) note that there is widespread recognition of the difficulty inherent inthis process of value creation. This is evidenced by the relatively high failure ratefor IJVs and cross-sectional studies which ‘point to a consistently low level of satis-faction with IJV performance, especially in developed countries’ (Beamish & Delios,1997, p. 108). The failure rate is likely to differ, however, among those firms gener-ally thought to be able to manage alliances well, and among those thought to bepoor at managing alliances (Alliance Analyst, August 15, 1997). Clearly, the lessonsof managing IJVs are important to practising managers, as successful managementis likely to improve the performance of IJVs. It is therefore important to identifywhat IJV experienced partners and managers suggest are the key lessons of managingIJVs, which is the basic goal of this paper.

Recent research on IJVs shows that the learning process, broadly defined, is animportant determinant for the formation of strategic alliances (Hamel, 1991;Inkpen & Beamish, 1997; Kogut & Zander, 1992). There is a basic distinction tobe made between learning from the partners, and learning about how to form andmanage IJVs. Inkpen (2000, p. 1020) elaborates on this distinction and notes twoforms of learning from partners: First, firms may seek access to partners’ knowledgeand skills but not with the aim of integrating the knowledge in their own operations.This type of partner learning is necessary when firms seek to combine their skillssuccessfully in an alliance. Second, a firm may acquire knowledge from its partnerthat can be used to enhance strategy and operations in areas unrelated to the allianceactivities. Learning from partners occurs largely through the transfer of tacit knowl-

85K. Glaister et al. / International Business Review 12 (2003) 83–108

edge, in order to enhance competencies, and the competitive position of the parentfirm—a view given prominence by the resource-based theory (Glaister, 1996; Hamel,1991). Learning about how to form and manage IJVs involves the acquisition ofknowledge useful in the design and management of other alliances which may beapplied to the management of future alliances (Inkpen, 2000). The focus of this studyis on this type of learning. There is paucity of data and analysis with respect to thetypes of lessons learned after a period of an IJV’s existence—or after its termination.This paper attempts to fill this lacuna by reporting empirical data from a survey ofUK-European IJVs in order to elucidate the management lessons that are deemedimportant. This framework is broader in scope than research such as that by Lylesand Salk (1997) and Child and Markoczy (1993) which focused mainly on the scopeof IJV companies learning from parents.

This study focuses on learning in a sample of UK IJVs with partners from westernEurope. We focus on one of the two broad types of inter-firm alliance activity(Contractor & Lorange, 1988) namely, equity joint ventures (EJVs) in contradistinc-tion to non-equity joint ventures. EJVs involve each parent company investing equityin a new entity, the JV company. Where at least one partner has its headquartersoutside the JV company’s country of operation or where the JV operates in morethan one country, the JV is deemed to be international (Geringer & Hebert, 1989).The paper explores learning among partners and IJV management utilising a multi-method research design using data from personal interviews and self-administeredquestionnaires.

The paper is organised as follows: a literature review is set out in Section 2.Section 3 sets out the research methods; Section 4 elaborates upon the major manage-ment lessons discerned from the interview and questionnaire data; Section 5 providesa discussion and development of future research propositions. Conclusions are inSection 6.

2. Literature review

2.1. Learning to manage IJVs

Two different objects of learning are identified in the prior literature (see, forexample, Buchel, Prange, Probst, & Ruling, 1998, p. 25; Tsang, 1999), they are‘ learning the other partner’s skills’ , i.e. co-operating to learn, and ‘ learning fromstrategic alliance experience’ , i.e. learning to co-operate. Co-operating to learn meansusing JVs as a medium for organisational and inter-organisational learning. Thisconcept of learning dominates the literature on learning in the context of alliancesand defines learning narrowly. The object of learning from a partner is usually acertain technology, or other types of know-how, of the other partner. This learningmotive is strong in alliances where the firms desire to discover new opportunities orto acquire new capabilities (Dussauge, Garrette, & Mitchell, 2000; Khanna, Gulati, &Nohria, 1998; Koza & Lewin, 1998; Lane, Salk, & Lyles, 2001; Nti & Kumar, 2000).Hence increasing numbers of IJVs are being created because both partner companies


hope to acquire new competencies by combining their resources in a process of inter-organisational learning (Buchel et al., 1998, p. 245). Doz and Hamel (1998, p. 52),for instance, emphasise that alliances are often the best way for companies to quicklyacquire and deploy new skills. Knowledge can be used jointly and combined acrossdifferent functions. This can only succeed, however, when both partners see the co-operation as offering a win-win situation. If one partner hopes to learn at the expenseof the other, the co-operative venture cannot be learning-oriented in the full senseof the term.

Learning to co-operate means striving towards a growing understanding of theprocesses and specific problems involved in IJVs, and continuing to develop one’sown practices and competencies in IJV management. Buchel et al. (1998, p. 25)argue that the important thing is to learn how a JV works, the problems that ariseand the possibilities that exist for organising, guiding and developing in differentareas. This concept of learning emphasises that managing an alliance with a partneris itself a great learning experience, especially if the partner is a foreign company.As noted in Section 1, this type of learning is the focus of this study.

Child and Faulkner (1998, p. 289) note that collaboration can enhance organis-ational learning through the accumulation of experience and knowledge about howto manage alliances. Moreover, this benefit is becoming increasingly significant ata time when more business activity is being organised through strategic alliances.Clearly, collaborative know-how might be used later in the design and managementof other collaborations.

Buchel et al. (1998, p. 244) point out that managing a JV is a demanding leadershiptask in which the main day-to-day challenge is to resolve the difficult conflicts whichrepeatedly threaten the existence of the co-operation. The scope of management thusextends far beyond organising the operational side of the company and assigningtasks to different people. It is a complex process which takes place at different levelsin the JV system and which cannot be reduced to a matter of formal rules, contracts,business procedures or sequential planning. Tsang (1999) notes that Parkhe (1991)identifies five dimensions of inter-firm diversity in global strategic alliances, namelysocietal culture, national context, corporate culture, and strategic direction, as well asmanagement practices and organisation. Parkhe argues that the diversity has negativeeffects on the longevity and effective functioning of an alliance, but organisationallearning and adaptation can mitigate the impact of diversity, i.e. the partnership canbe strengthened when the partners learn to analyse their diversity and to devise sol-utions to accommodate the differences. This implies that in modern business, theknow-how of managing international strategic alliances has become an essentialresource of most firms, and learning is the means to acquire and accumulate theresource.

Learning from strategic alliance experience, requires an experiential learning pro-cess, as distinct from learning the other partner’s skills, that entails a vicarious learn-ing process (Tsang, 1999). Vicarious learning is more focused and requires the staffconcerned to have the necessary background knowledge. As Tsang (1999) notes thisdoes not imply that the partners must have an intent to learn. Individual and organis-ational learning may be an unconscious activity. However, an intent to learn may


spur an organisation on to higher levels of learning. Hamel (1991) argues that apartner’s intent to internalise the other’s skills is a key determinant of learning; thestronger the intent the higher the chance that the partner will win the learning race.Tsang (1999) argues that although learning intent is not a necessary condition forlearning, especially experiential learning, to take place, the presence of learningintent in a company is the first step towards effective learning.

In asking how exactly might firms learn to manage alliances, or acquire an alliancecapability, Anand and Khanna (2000, p. 298) break the question into two parts: first,how individuals within the firm learn and, second, how firms harness the learningexperiences of such individuals. They note that repeated exposure to different part-ners exposes individuals within the firm to a broad repertoire of experiences. Thisfacilitates the interpretation of new unforeseen contingencies in their subsequentalliance interactions. The ability to learn from a particular alliance is thus likely tobe enhanced by the set of problems encountered in prior learning experiences. Theknowledge built up in this way will in part be about learning skills themselves (Ellis,1965), or more broadly about ‘ learning to learn’ (Estes, 1970).

Anand and Khanna (2000) point out that learning to learn at the firm level is acomplex function of the individual level phenomenon. Cohen and Levinthal (1990)relate each firm’s learning ability to its ‘absorptive capacity’ . Absorptive capacityrefers to the ability of a firm to understand and exploit knowledge in various knowl-edge domains, and may be used as a measure of a firm’s ability to appropriate knowl-edge from an alliance relationship. The greater the absorptive capacity of a firm,the more knowledge it can appropriate from a given volume of alliance-generatedknowledge. Differential learning may also occur because the division of work mayexpose the firms to different amounts of alliance-generated knowledge. Nti andKumar (2000) note that absorptive capacity is a characteristic of a firm that isrequired and shaped over many years and is not likely to change during the courseof a particular alliance relationship. Absorptive capacity is a product of the firm’sorganisational culture, which shapes its motivational orientation, technological com-petence, and the quality of the human assets it attracts and develops. The process ofaccumulating absorptive capacity depends on a firm’s prior preparation and requirescontinuous and sustained investment (Cohen & Levinthal, 1990, 1994).

Cohen and Levinthal (1990) also point to the possibility of path dependence inlearning to learn. Firms that have learnt to learn will continue to do so at an increas-ing rate, while those that have never invested in learning from different experienceswill not find it optimal to do so. In the context of alliances, this would imply thatheterogeneity in alliance capabilities will persist over time (Anand & Khanna, 2000).It seems that what is learned in a focal IJV is likely to vary with JV prior experience.This JV prior experience may be a function of the number of JVs the partner hashad and the number of JVs the respondent has been involved in—these might betwo different things. It is unlikely to be the case that learning in either respect is amonotonic increasing function. It might be better to think of ‘ learning to learn aboutmanaging IJVs’ as an inverted U-shaped function, i.e. learning increases in the earlyphases of IJV partnering, peaks and then declines with further experience as learningopportunities diminish with further experience. In asking respondents to indicate


what they have learned from a focal JV the responses are likely to vary withprior experience.

Despite support for the idea that learning to manage alliances might be important,there has been little empirical analyses on this issue. Lyles (1988) found unanimousagreement among managers and staff of two US and two European firms, with asuccessful history of operating IJVs, that there was a valuable transference of experi-ence from previous ventures. This transference took place largely through the sharingof experiences, the continuity of top-management oversight, and the development ofmanagement systems. The companies were also able to use their experience as acredential that made it easier for them to form new IJVs. In related empirical workGulati (1995) shows that pairs of firms appear to learn over time to manage theircollaborative activities more efficiently. Anand and Khanna’s (2000) empirical analy-sis identifies two important factors that drive value creation in alliances: a firm’sexperience in managing alliances, and the existence of persistent firm-specific differ-ences in the ability (or inability) to create value through alliances. They find strongevidence that firms learn to create more value as they accumulate experience in jointventuring. They also find strong and persistent differences across firms in their abilityto create value and interpret these differences as reflecting differences in ‘alliancecapabilities’ .

While the prior literature demonstrates the importance of learning to co-operatethere has been little elaboration of the key areas in which such learning improvesthe management of IJVs. Consequently, the basic research question to be exploredin this study is the nature of the lessons learned in the management of IJVs.

3. Research methods and sample

3.1. Sample/data sources

The unit of measurement is the IJV, which in this study constitutes three elements:two partners and the IJV management. The study involves IJVs voluntarily formedbetween partners from developed market economies. The research question identifiedin the preceding section was examined using a sample of UK IJVs with partner firmsfrom western Europe, formed between January 1990 and December 1996. A list ofqualifying IJVs was obtained from the Financial Times Mergers and Acquisitions(FT M&A) File. This is an online database providing comprehensive details on inter-national bid activity including mergers, acquisitions, share swaps, buyouts and buy-ins as well as JVs. The information is researched and collated on a daily basis froman array of major international newspapers and magazines, as well as press releasesand corporate and stock market sources. It was assumed that this source representeda good approximation to the population of qualifying IJVs and that any selectionbiases would be minimal.

Next the FT data were grouped for homogeneity across a number of key character-istics. First, we selected ventures with partners from western Europe. This decisionwas driven by the need to keep the interview costs of the project relatively low. We


selected only two partner IJVs because of difficulties associated with analysing mul-tiple partner IJVs, which may demonstrate significant differences from IJVs withtwo partners (Geringer, 1991). IJVs with activities involving manufacturing or activi-ties closely related to manufacturing were selected to minimise differences acrossindustry sectors. Recognising that data for very new IJVs might not be meaningful,it was decided to select only those IJVs that had been in existence for at least oneyear at the time of data collection. A sample size of 20 IJVs was decided upon inorder to achieve the aims of depth and coverage within the cost and time constraintsof the study. We randomly selected an IJV and attempted to gain permission tointerview one of the elements of the IJV. Once one element agreed to be interviewedthe other two elements usually readily agreed to an interview also. If it was notpossible to obtain an interview we randomly selected another IJV. While randomlyselected, the sample should be viewed more as a ‘purposeful sample’ . According toPatton (1990, p. 169) “The logic and power of purposeful sampling lies in selectinginformation-rich cases for study in depth. Information-rich cases are those fromwhich one can learn a great deal about issues of central importance to the purposeof the research, thus the term purposeful sampling” . Erlandson, Harris, Skipper, andAllen (1993, pp. 83–84) note that an aspect of purposeful sampling is sample size.‘The basic rule is, “There are no rules for sample size.” In qualitative research oneis looking more for quality than quantity, more for information richness than infor-mation volume.’

3.2. Procedures

To enhance the credibility of the findings, and interpretations based upon them,the study adopted the technique of triangulation. Triangulation was achieved throughthe use of multiple and different sources of information on each IJV (partners andIJV managers) and different data collection modes (interview and questionnaire).

A multi-method personal interview and self-administered questionnaire approachwas used to obtain data from each of the three elements of the IJV system (i.e. UKpartner, western European partner, IJV management). We also obtained and reviewedthe annual reports and accounts of the parent firms. The personal interview scheduleand self-administered questionnaire were developed from pilot interviews with twoUK partners in IJVs with foreign firms that did not form part of the qualifying dataset. In the design and conduct of the interviews, account was taken of the ‘nativecategory’ issue. By ‘native’ in this context we mean self-generated and valid in thelocal context (Buckley & Chapman, 1998). There can be no guarantee that wordsand categories are congruent from one context to the next, so we did not assumethat managers shared our ‘objective’ understanding of categories or words such as‘ lessons’ . Qualitative results for answers to questions were obtained only after a fullexploration of the issue under discussion. There was a specific question in regard tolessons learned. To the parent company managers it was phrased as ‘what has yourcompany learned about managing JVs from this JV which could be useful in manag-ing future JVs?’ ; and to the JV managers ‘what have you learned about managing


JVs from this JV which could be useful in managing future JVs?’ . Invariably, replieswere probed with further questions.

The sample size of 20 IJVs, therefore involves 60 elements of study: 20 UKparents, 20 foreign parents and 20 IJV managements, and correspondingly 60 in-depth interviews. An attempt was made to locate and interview the most seniormanager in each element of the IJV who had the greatest knowledge of the venture.The 60 interviews were conducted over the period October 1997 to October 1998.The job category of the interviewees show that they were all in senior managementpositions. Interviewees were all fluent in English so all interviews were conductedin English by two of the authors. Each personal interview lasted for approximatelyone h. Interviews were usually conducted in the interviewee’s office, which facili-tated the consultation of relevant documents if the interviewee needed to checkdetails regarding the IJV. The interviews elucidated perspectives on a number ofaspects of IJV activity including reasons for formation, partner selection, manage-ment control and performance. These are the major dimensions of IJV investigationidentified in the prior literature (see Parkhe, 1993). Where acceptable to respondents,the interviews were tape-recorded. Only three respondents declined to be tape-recorded. For these three interviews copious notes were taken of the responses whichwere transcribed shortly after the interview. Tapes were transcribed by secretarialassistants. The accuracy of transcripts were checked by the interviewing authorsagainst the original recordings.

Following completion of the interview, the interviewee was invited to identifythree senior colleagues in the same element of the IJV who had a good understandingof the research issues and relevant knowledge of the venture. Three envelopes eachcontaining a covering letter, copy of a self-administered questionnaire and a returnenvelope were left with the interviewee to pass on to the identified colleagues. Thecovering letter outlined the purpose of the research and promised confidentiality torespondents. The questionnaires were available in English, French, German and Ital-ian. A total of 180 questionnaires were distributed. After one written reminder atotal of 63 self-administered questionnaires were returned, representing a responserate of 35%. The job category of the questionnaire respondents indicates that therespondents were also in senior management positions. All of the respondents hadpersonal involvement in the IJV on which they reported. We are confident that thetwo groups of respondents (from interviews and self-administered questionnaires)were able to present an overall perspective for each IJV.

3.3. Data analysis techniques

Analysis proceeded by way of parallel mixed analysis of the qualitative (interview)and quantitative (self-administered questionnaire) data. Known as triangulation ofdata sources, parallel analysis of qualitative and quantitative data is probably themost widely used mixed data analysis strategy in the social and behavioural sciences(Tashakkori & Teddlie, 1998, p. 128).

The narrative data (audiotapes) were converted into partially processed data(transcripts) before coding and analysis. The themes of analysis were established a


priori. The highly structured nature of the interviews facilitated coding during theanalysis stage of the study. Data were coded using typical content analysis procedures(Lincoln & Guba, 1985; Taylor & Bogdan, 1984). The authors independently codedthe interviews. Discrepancies were resolved through consensus between theresearchers. The transcripts of the interviews were read and re-read by the researchersin order to create a framework of dimensions of lessons of IJV management.Interpretation errors are a potential validity threat (Kirk & Miller, 1986). We haveattempted to limit this possible hazard by analysing data from multiple respondentsand the use of multiple coders. To facilitate coding, data retrieval and qualitativedata analysis the NUD∗IST software was employed.

Data derived from each of the elements of the IJV overcomes criticism in theprior literature levelled against IJV studies that only gather data from one, or at besttwo, of the IJV elements (Osland & Cavusgil, 1998).The characteristics of the sampleare shown in Table 1. The average age of the IJVs is 3.92 years (SD �1.86 years).

Table 2 shows a list of the JVs, the nationality of the partner, and the industryof the JV.

4. Lessons learned

Coding analysis of the interview data revealed a large number of categories oflessons learned that were highlighted as being important—these are listed in Appen-dix Table A1. A large number of categories elicited responses from only one or twoof the interviewees. However, several categories elicited eight or more responses,these involved lessons associated with culture, the strategic vision of the IJV, issuesof operational decision-making, the anticipation of implementation issues, the man-agement of a 50–50 equity relationship, and matters of trust. It is apparent from thecrude listing of the categories of response that the UK managers were able to identifymore lessons learned in the management of IJVs (47 citations) than were Europeanpartners or IJV managers (37 citations each).

Of the 63 completed self-administered questionnaires received, 41 answered thequestion on lessons learned. The total number of citations was 68 spread over 27broadly distinct categories, as shown in Table A2. Again most categories elicitedresponses from only one or two of the respondents with five categories cited five ormore times. The most frequently cited categories from the questionnaire data largelyconformed to those of the interview data in that they were concerned with lessonsassociated with shared strategic vision, matters of culture—either national or corpor-ate culture, communications and operational decisions. The identification of lessonsof managing IJVs were more readily expressed in the questionnaire responses bythe IJV managers (39 citations) followed by the UK Partners (20 citations) and thenthe European partners (nine citations).

While the data coding revealed a large number of distinct responses to the questionof lessons learned, further examination of the interview transcripts and written ques-tionnaire responses revealed that these categories broadly grouped into three distinct


Table 1Characteristics of the sample

Characteristic No. % Characteristic No. %

Interview data Questionnaire dataResponses ResponsesUK partners 20 33.3 UK partners 16 25.5Foreign partners 20 33.3 Foreign partners 15 23.8IJV managers 20 33.3 IJV managers 32 50.8Total 60 100 Total 63 100Nationality of partner Nationality of partnerFrance 8 40 France 23 36.5Germany 1 5 Germany 4 6.3Holland 3 15 Holland 7 11.1Italy 2 10 Italy 13 20.6Norway 1 5 Norway 2 3.2Spain 2 10 Spain 4 6.3Sweden 3 15 Sweden 10 15.9Total 20 100 Total 63 100Industry of IJV Industry of IJVAgricultural 2 10 Agricultural 4 6.3production/distribution production/distributionAircraft ground handling 1 5 Aircraft ground handling 4 6.3Aircraft parts manufacture 1 5 Aircraft parts manufacture 5 7.9Chemicals production 2 10 Chemicals production 4 6.3Defence Manufacture 3 15 Defence Manufacture 9 14.3Electrical parts production 1 5 Electrical parts production 2 3.2Explosives production 1 5 Explosives production 2 3.2Film production 1 5 Film production 3 4.8Food 1 5 Food 3 4.8manufacture/distribution manufacture/distributionMotor parts production 2 10 Motor parts production 8 12.7Motor vehicle production 1 5 Motor vehicle production 3 4.8Steel processing and 1 5 Steel processing and 3 4.8distribution distributionTelecommunications 1 5 Telecommunications 2 3.2Textiles production 2 10 Textiles production 11 17.5Total 20 100 Total 63 100

areas of learning with respect to the management of IJVs: the management of theIJV formation process, management of the boundary relationship between partners,and the management of the operations of the IJV. These three areas include notonly findings which confirm the expectations confronted in the prior literature (IJVformation process and IJV operational management) but also one unexpected groupof findings—the importance of boundary relationships between the elements of theIJV. These three areas of management and the key lesson categories are illustratedin Fig. 1. As shown in Fig. 1 several of the categories of lessons impacted on more


Table 2JV number by partner nationality and industry

JV number Partner nationality Industry

1 Sweden Defence manufacture2 France Aircraft parts manufacture3 France Chemicals production4 France Defence manufacture5 Italy Textiles production6 Holland Film production7 Norway Motor parts production8 France Defence manufacture9 France Chemicals production10 Sweden Defence manufacture11 Sweden Steel processing/distribution12 France Electrical parts production13 Germany Textiles production14 France Food distribution15 Spain Explosives production16 Spain Agribusiness17 Italy Motor parts production18 Holland Telecommunication19 Holland Agribusiness20 France Aircraft handling

than one of the broad groupings. The following sub-sections elucidate the lessonsregarding these three areas of IJV management.

4.1. IJV formation process

By far the clearest lesson regarding management of the IJV management processis the need for the partners to establish a clear shared strategic vision for the IJV.At the formation stage both parents must broadly agree to their respective objectivesin regard to the IJV over its long-term duration. This means recognising that parentsinitially may have different goals with respect to the venture, but these must bereconciled and in doing so agreement reached in regard to common goals and strategyfor the IJV. There was a general view from respondents that this leads to a smootherand more efficient running of the IJV. It follows, therefore, that where there is sig-nificant divergence in goals and strategy, there is a fear that this will have a detrimen-tal effect on a JV’s performance. The UK manager of JV 1 provided a typical viewin regard to common goals/strategy:


Fig. 1. Lessons in the management of IJVs.

I think the first thing is to make sure that both parties understand very clearlywhy they are getting together so they have a common aim, and in that sensesharing the strategic vision, i.e. not what’s right today, but what is going to beright in the long term, what both companies strive to achieve.

It is clear that one partner should be very careful when selecting the other partnercompany. Respondents identified a number of lessons in connection with partnerselection, but of particular importance is the identification of skill and resource comp-lementarities between the partners, ensuring that resources are available and estab-lishing clearly what is to be shared between the partners. During the IJV formationstage partners should undertake a formal analysis of the financial viability of theproposed venture, and even undertake a due diligence analysis to ensure that what thepartner promises is actually delivered. During the negotiation stage one respondentrecommended that advice be obtained from third parties, particularly consultants,who can provide an objective view on the proposed venture and help to avoid prob-lems from the beginning.

The atmosphere in which the negotiations are conducted is also relevant, parti-cularly the need for partners to have a high degree of integrity. An IJV is a partner-


ship, and the partners must be open and seek to avoid hiding anything that is to theiradvantage and not to the benefit of the IJV. The atmosphere of negations is alsoaffected by the degree of trust and commitment between the partners as well as thenature of prior and current business and personal relationships between the partnercompanies. These issues will be examined when considering boundary relationships.

During the formation process it is necessary to determine the structure of the IJVand to anticipate implementation issues. These factors have an obvious bearing onthe operational management of the IJV and will be discussed in more detail whenexamining the lessons of IJV operational management.

A minority of respondents emphasised the need to anticipate an exit strategy fromthe IJV. This should be undertaken not in the sense of planning for failure but ensur-ing that there is a contingency arrangement should the partner seek an exist position.The options of acquiring the partner’s share, selling to the partner, selling to a thirdparty or liquidating the business should be carefully considered. It was suggestedby one respondent with a great deal of IJV experience that there must be an exitstrategy included in the contractual arrangement, because inevitably there will comea point in time when the strategies of the partners change and consequently theirattitude to the IJV. This may come about, for example, from the change of ownershipof the partner, through merger or acquisition. At this point the partner should ensurethey are not locked into a relationship they would rather dissolve. In the euphoriaof establishing the IJV when each partner is displaying a strong commitment, oftena ‘divorce settlement’ is not negotiated or not well considered because of the negativeovertones. For some respondents, however, negotiating an exit strategy is a veryimportant part of the formation process. The basic lesson is to have a clear way outof the relationship before it formally begins.

4.2. Boundary relationships

All of the boundary relationship issues are also associated with either the IJVformation process or IJV operational management. This is hardly surprising as theboundary relationship is key to both activities. Those lessons that bear on both theIJV formation process and boundary relationships will be discussed first. One lessonis that the partners should fully commit themselves to the IJV. Evidence from respon-dents indicates that it is probably better not to enter into an IJV than to do so in ahalf-hearted manner or with second thoughts. Commitment requires the full involve-ment and confidence in the IJV of the top management of each partner. Concomitantwith this should be the participation of senior managers in the formation stage ofthe IJV. Supporting prior research which identifies a greater propensity of firms thathave allied in the past to do so again (Gulati, 1995), management of the IJV forma-tion process and boundary relationships can be improved if senior managers fromthe partners have had a previous business relationship. Respondents argued that thispast relationship is beneficial in part because it provides an informal mechanism forkeeping control of contentious issues, in that the relevant parties should be able tocommunicate with each other outside formal meetings. The past relationship alsoprovides cohesion between the partners and lays the foundation for trust.


Partly engendered by past relationships, but also growing out of the focal IJV,several respondents stressed the importance of managers forging personal relation-ships beyond the business relationship. The development of personal relationshipsin turn nourishes trust and understanding. Good personal relationships at the seniorlevel of the partners are seen as important in fostering beneficial IJV performance.The view was expressed that when the partners’ senior managers most directlyresponsible for the JV have a good personal relationship there is a greater probabilitythat the venture will work well. A good relationship between senior management ofparents is considered beneficial; whereas if this relationship is poor, problemsinvariably arise. This was explained by the European manager of JV 20:

And with the two partners, if there is a knowledge at the management level ofthe two partners, due to past experiences or working relationships, and trustbetween [them], it is clearly a help. Because… the top management has clearlya positive and strong effect on the workforce, the managers of the joint venture,they feel supported, they feel confident.

A concern for JV partners that stems from difficulties of joint ownership is tominimise conflict and disputes. The importance of good personal relationship appearsto be key in addressing dispute resolution. Though formal mechanisms are almostalways established to resolve potential disputes and disagreements—usually throughboard level discussion—there is a reluctance to go down this path. A desired alterna-tive is for senior managers to have good working relationships with their counterpartsso that tension is reduced from the outset.

In situations where personal relationships are not maintained, then problems arelikely to arise which will ultimately affect the performance of the IJV. Enduringpersonal relationships may be most difficult to maintain when the IJV involves twopartners that are considerably different in size. This was noted by one of the interviewrespondents from a relatively small partner company. The larger partner rotated itspersonnel so that the smaller partner rarely saw the same set of managers. This maybe particularly problematic when the managers involved in drawing up the originalIJV agreement are not the same people the partner has to deal with subsequently,and who do not have the same tacit understanding of the meaning of the agreement.This leads to the recommendation that those who negotiated the IJV agreementshould at least spend some time ‘bedding in’ the working arrangements of the IJV inorder to develop a better interface between the partners. Ultimately past and currentrelationships should lead to a better understanding of the partner. In any event eachpartner must make the effort to understand the other. This entails an understandingof the partner’s business, objectives, culture, etc. There may be a reluctance to sur-face some sensitive issues, so partner understanding requires patience to tease thecrucial issue to the surface.

The importance of trust was emphasised by several respondents. There are manydefinitions of trust and we did not impose a particular meaning of the concept onrespondents. As noted in the Section 3, in the conduct of the interviews account wastaken of the native category issue. The concept of trust discussed by the respondents


was therefore valid in the context of their own experience. It was clear, however,that there was a common sense understanding of the concept of trust by respondentsthat pervades many definitions in that ‘ it refers to the willingness of one party torelate with another in the belief that the other’s actions will be beneficial rather thandetrimental to the first party, even though this cannot be guaranteed’ (Child &Faulkner, 1998, p. 45).

The key lesson learned with respect to trust stems from the familiar worry thatthe partner is acting, or will act, opportunistically. If this happens it is a sure signthat the JV’s future is in jeopardy, hence, trust between parents helps the IJV. Issuesof trust and partner integrity are acknowledged to be important determinants in theIJV decision-making process, so concerns in regard to these ought to be widelyexpected. Although trust may naturally evolve through regular interaction betweenthe partners, respondents recommended that attempts should also be made to deliber-ately inculcate trust, because it cannot be assumed that it will occur spontaneously.Deliberate efforts to build up a degree of trust may come, for example, through teambuilding in the joint management of the IJV.

Many of the facets of the boundary relationship are clearly mutually reinforcing.There is likely to be a positive cycle of relationship reinforcement beginning with ahistory of prior co-operation that builds into strong supportive personal relationshipsbetween senior managers. This in turn will lead to partner understanding and commit-ment for the IJV. In turn the partner interactions are likely to be characterised byintegrity and trust, which serves to reinforce the positive nature of the personalrelationship, commitment, and. understanding. The generation of this positive processof interaction will in general improve the boundary relationship and enhance thesuccess of the IJV. Conversely, where there is obstructed development of personalrelationships, this will negatively impact on partner understanding and commitment,which is likely to foster low levels of integrity and trust, to the ultimate detrimentof IJV performance.

As shown in Fig. 1, culture is relevant to the IJV formation process, boundaryrelationships and IJV operational management. The aspect of culture that particularlyaffects the IJV formation process and boundary relationship is that of national cul-ture. The importance of national culture is recognition that cultural issues such aslanguage and national work practices (as distinct from firm-specific operating culturediscussed below) in general are nominally extraneous factors keenly impinging uponinter-firm collaborative activity. It is a factor that cannot be controlled—hence itshould be carefully evaluated before proceeding with the IJV. Each partner shouldidentify what kinds of differences they can and cannot tolerate. This suggests thata ‘soft issue’ such as national cultural differences can act as a decisive influence inthe formation of a JV so that on occasion, even where there is potentially a ‘goodfit’ between two partners, the country of a parent company or the intended countryfor a JV’s operations can prevent the partnership from proceeding for reasons ofcultural mismatch. The key lesson here is the belief that forming IJVs with firms fromcountries with sharp national differences in culture presents additional difficulties inthe smooth running of a JV and hence should be entered into warily. To proceedwith the venture entails ensuring that the cultural differences are both understood


and managed. Respondents stressed the importance of showing respect for and sensi-tivity to the national culture of the partner. Moreover, managers have to learn todeal with these differences. This requirement has implications for the kind of peoplethat are placed in a boundary relationship or an IJV management role, and in turnfor staff training and preparation for undertaking such roles. Such people should betolerant of the nationality of the foreign partner, or at least should be willing tounderstand the culture of the partner. Education and training practices of the partnersshould involve thinking beyond the national culture and embrace multi-cultural per-spectives. Unless partners can develop an understanding and tolerance of differentcultures the venture is likely to head for trouble.

Several of the categories of lessons were pertinent to both boundary relationshipsand IJV operational management. The importance of good communication stemsfrom consistently and clearly informing the partner about relevant information per-taining to the JV. It therefore follows that lack of effective communication maycause misunderstandings between the partners or between partner and JV manage-ment which may, in some circumstances, lead to a loss of trust and ultimately toweakening in JV performance. Related to this is the imperative to surface disagree-ments. Problems should not be hidden or avoided but should be surfaced very early.This is in order to prevent ill feelings or disagreements from lingering. It is necessaryfor partners to be frank with each other and to state the unpalatable in order to clearthe issues out of the way.

We found that a contentious issue is the division of equity shares between thepartners and in particular the problems that may arise from a 50–50 split. Such IJVshave often been characterised as particularly sensitive to cultural differences andparental tensions (Killing, 1983; Salk, 1992). With respect to lessons learned con-cerning ‘difficulties of 50–50 JVs’ , respondents noted the potential for constant argu-ments between the parents leading to the slowing down of the decision-making pro-cess with ultimately, a damaging impact on the JV. Generally, those who cited thislesson thought that one partner needs to have majority shareholding.

Partners need to assess carefully the pros and cons of an equal equity partnership.Negative views from respondents on a 50–50 split were that it imposes a burden onthe IJV and a disincentive to the teams of people working in the venture. Decision-making took much longer and bickering between the shareholders adversely affectedthe performance of the IJV management. Compromises thus have to be arrived atin order to make the relationship work, which may lead to sub-optimal decisions.Alternatively, compromises cannot be arrived at which frustrates the IJV manage-ment. A partner can stop the operation of the JV if one of them does not agree withthe proposed solution.

Many respondents favoured an unequal equity split in order that the dominantpartner could, in effect, take control of the IJV. An unequal equity share avoidsconflicts that cannot be solved easily. In general the view was that the IJV wouldperform better if there were a dominant partner. These sentiments echo the con-clusions reached by Killing (1983). We also found, however, that some respondentshad a favourable view of 50–50 relationships, reporting positive experiences. Divid-


ing the equity 50–50 and putting control procedures on an equal footing was con-sidered by some respondents to be a better arrangement than an unequal equity distri-bution where difficulties may be experienced by minority partners in influencing themajority partner. A 50–50 division of equity in creating a situation of equalitybetween the partners may also tend to foster the development of trust. Further, itmay be conjectured that the equity share will play a role in the IJV formation pro-cess.1 The division of the equity shareholding is clearly a contentious issue, of whichpotential partners to an IJV must be aware.

4.3. IJV operational management

A lesson cited frequently by respondents was the need to anticipate implemen-tation issues and relatedly, to identify responsibilities in the management of the IJV.From the outset, partners must clarify issues of management control, managementstructures, and management roles and how they will rotate. This is in order to ensurethere is no ambiguity, and that managers know what their future roles are to be.

Data indicated that through the formation process and into the ongoing operationof the venture it is necessary to identify which party will be responsible for deliveringwhich end result and to know how the implementation plan will evolve as the IJVmatures. It is necessary to define clearly who is responsible for each activity and toavoid having more than one person responsible for the same thing, with associatedlines of demarcation in terms of reporting. This prevents one party playing off theother. It also prevents a more senior manager playing politics between the two.

It should be made clear exactly who is responsible for which set of decisions.This means identifying the levels of decision-making—which decisions go to theparents, the IJV board, and which are handled by IJV managers. This requires effec-tive communication between all of the parties. It also requires effort to be put intoteam training in order to encourage practical working together from both sides. Part-ners should recognise that it will take some time to bring together different systems,ways of thinking and approaches to problem solving, and to resolve the personalityclashes that are inevitably going to occur. A further lesson is to develop a successionplan for the senior management who will operate at a strategic level.

Allied to anticipating implementation issues are the lessons from the actual issuesof operational decision-making. A fundamental point is that a partner cannot takethe decisions that it could with its own business, because it simply does not havethe freedom to act. Consequently, operational issues may be a problem because thedecision-maker has to take into account the opinions of a number of other parties,and these may differ. This is why an effective decision-making process is required.One respondent argued that this is facilitated best through a flat management struc-ture. At some point disagreement will inevitably occur and as all parties have toovercome these disagreements, the flatter the hierarchical structure the better.

1 We are grateful to a reviewer for these points.


The fact that there will be occasions when its not possible for the IJV managementteam to move quickly on decisions that require approval of both of the shareholders,is likely to lead to frustration within the management team. As a consequence thereis a requirement for mature and experienced managers in an IJV, probably more sothan if it the venture was a wholly owned subsidiary. This is because the IJV man-agers have to learn to deal with these frustrations, to manage round them and toachieve the consensus that is required. Related to this, respondents noted that becauseof the greater difficulty of running an IJV, more people are probably required tostaff it than would be the case with a wholly owned subsidiary.

The management of the IJV leads to a number of related issues noted by respon-dents. A somewhat controversial area is the extent of autonomy that should begranted to the IJV managers. There are arguments for and against autonomy in IJVs(for a survey see Newburry & Zeira, 1999, pp. 266–267). One respondent acknowl-edged that for him this was an unresolved issue. From other respondents there wasa view that parent companies must give guidelines but not be involved in the dayto day business and tactics of the IJV. While there is no clear prescription from therespondents in our sample with regard to the extent of IJV autonomy, it is clear thatthis is an issue parents must confront. One point stressed was the need for neutralityon the part of IJV managers in that they must not favour one partner, even if theyare seconded to the IJV from one of the parent companies. It is necessary for theIJV management to consider themselves as working for the JV and not to operateas part of the parent company. In this respect it is necessary that IJV managers donot bring the baggage of the previous relationship with them and do not makeassumptions that things will be done in a particular way. Respondents emphasisedthat it is important that decisions are made in the best interests of the IJV, and thatthe decision-making approach has to be even-handed so that one partner is not fav-oured over another. It is recommended that if necessary the managers must be trainedto that view.

Seconded managers may also have personal concerns. Such managers could feelfrustrated if they believe they are being kept in the IJV management team becausethey are performing well, but at the same time this constrains them from beingconsidered for career advancement elsewhere in the parent company. Ultimately, thiscould cause deterioration in morale and effort on the part of the affected managers.In this regard career progression should be identified for IJV managers with ease ofre-assimilation into the parent company provided as an option.

Lessons concerning the operating culture were emphasised by many respondents.A well-identified lesson involves the problems of bringing together two culturallydifferent organisations in a JV and trying to develop to a common culture. This canbe a frustrating process but it may also impose real costs on the IJV if the resultingproblems and conflicts cause personnel to leave the business. This element of IJVmanagement should not be under-estimated. Partners should be aware that that thereis a need to ensure that the culture of the IJV is developed and evolves. Moreover,the culture of the partners should be well understood by the operating managerswithin the JV.


Lessons learned concerning operating culture relate to the full gamut of the modusoperandi of a JV. This subsumes how a JV is managed. One lesson is to identifycarefully the allocation of parental responsibility for the various functional areas ofthe JV, that is, production, quality, finance, marketing, R & D, pricing, investment,reporting mechanism, etc., as well as agreeing to the limits of the JVs autonomy asnoted above. The interviewee responses show that there is great concern to ensurethat the operational aspects of a JV are ones that parents are comfortable with. Ifthis is not so, then there is a real danger of tensions arising between the partnersand problems within the JV itself, with the risk of the IJV failing. In the samplethis was most apparent between those IJVs involving private parent companies (allBritish) and some state-owned European companies. This is where the clash ofoperating culture was greatest—with very different histories, traditions, workingpractices, and goals.

Another aspect of culture is the lingua franca to be used. In all of the IJVs in thesample, the English language was used between the partners. However, some Euro-pean respondents noted that even though English was the agreed medium, they wereat times irritated by the UK partner’s failure to appreciate that they were communi-cating with those for whom English was not the mother tongue. This, in turn, ledto operational tensions.

5. Discussion and research propositions

The formation of an IJV assumes superiority of organisational mode over alterna-tives such as market contracting or the creation of a wholly owned subsidiary(Buckley & Casson, 1996). However, exit from the JV relationship is likely to bemore difficult than vis-a-vis market exchange whilst control of the JV is likely tobe more problematic than in comparison with a subsidiary. The formation of a JVimplies, indeed requires, mutual forbearance on the part of parent companies thatneeds to be balanced with moral hazard implicit in a JV contract of which there aretwo main types: actions taken by one parent to the detriment of the other; and actionstaken by the JV management that are detrimental to one or both parents. Both stemfrom insufficient information and consequently, the JV contract is inherently incom-plete. The prevention, therefore, of such opportunistic behaviour (Williamson, 1975)necessitates effective monitoring and control procedures over the JV (Beamish &Banks, 1987; Buckley & Casson, 1988). Nonetheless, the co-operative nature of aJV contract necessitates a degree of trust in the partner (Faulkner, 1995; Madhok,1995) so that trust becomes a crucial variable in the JV phenomenon. Parents musttrust or learn to trust both their partner as well as those managing the JV. Thisrequires refraining from opportunistic behaviour and trusting that both the partnerand JV management shall do likewise (Nooteboom, 1999). There is, however, alwaysthe risk of a breach of trust and parent companies are cognisant of this. To ensurethat potential losses emanating from this possibility are minimised may ultimatelyrequire the termination of the JV contract so that an exit strategy needs to be planned


either at the initial agreement stage or during the course of the JV’s existence. Thus,the intermediary, hence potentially more unstable, nature of the JV is likely to giverise to distinct problems and considerations so that the learning experience will benovel and lessons learned will reflect this.

To the extent that learning allows the partner companies to better manage the IJVit is expected that performance outcomes will be a function of this learning. IJVfailure rates among firms generally able to manage IJVs will be expected to be lowerthan failure rates among those firms thought to be poor at managing IJVs. Generallythe performance objectives are more likely to be met in those IJVs where the partnershave absorbed the lessons of managing IJVs.

These observations give rise to a number of research propositions: These prop-ositions are better regarded as identifying some important research topics than por-traying a comprehensive research agenda.

Proposition 1. The necessity for mutual forbearance will give rise to concern forissues of trust.

Proposition 2. The potential threat of opportunistic behaviour will focus attentionon an exit strategy.

Proposition 3. Performance outcomes will be superior in those IJVs that havelearned better how to manage IJVs.

Differences in lessons across characteristics of the sample are difficult to test withthis sample because of the large number of inter-related lessons and the relativelysmall sample size. However, future research should consider how lessons learnedmay vary with the following characteristics: motive for IJV formation, previous IJVexperience by parents, cultural distance of the partners and the number of parents.Young, Hamill, Wheeler and Davies (1989, p. 19) have noted that it is necessary todistinguish between the role of alliances in establishing corporate linkages, such assharing investment risks, attainment of economies of scale, exchange of complemen-tary technology, etc., as opposed to their role in corporate entry strategies, principallyentry to new geographical markets. This suggests greater difficulties and possiblygreater risks involved in market entry IJVs and highlights the importance attributedto a close knowledge of national cultural factors when a new market is being envis-aged. In this respect examination of how lessons differ within IJVs designed formarket entry as compared to other motives for formation would be instructive.

The more inexperienced the parent firms are in the formation and operation ofIJVs the greater the rate of new learning is likely to be. Parent companies startingwith their first few IJVs are likely to be more naive and prone to making errors thanare more sophisticated partners that have been involved in the process several times.The nature of the learning is therefore likely to be an inverted U-shape with respectto the number of previous IJV relationships.

The data from this sample emphasises that the importance of cultural issues inrelation to the lessons learned in managing IJVs. The nature of these lessons is likelyto vary with the cultural distance between the partners. Ceteris paribus, where cul-tural distance is great this is likely to promote a greater learning experience thanwhere cultural distance is small.


These observations give rise to the following propositions:Proposition 4. The lessons of managing IJVs will vary with the motives for IJV

formation.Proposition 5. The lessons of managing IJVs will vary with the extent of prior

IJV experience of the partners.Proposition 6. The lessons of managing IJVs will vary with the cultural distance

of the partners.

6. Conclusions

This paper has reported on an area of IJV research that has hitherto been relativelyneglected, namely, the major types of lessons learned from the IJV experience. Whendiscussing their findings, Anand and Khanna (2000) note that they cannot distinguishwhether learning occurs by firms getting better at screening their alliance partners,or because they get better at inter-facing with these partners (perhaps through design-ing better contracts or through getting more adept at managing relationships). Thefindings from this study indicate that each of these processes are likely to occur.Learning to manage IJVs occurs across the areas of formation, partner relationshipsand operational management of the IJV. Learning to managing IJVs is a multi-facetedand inter-related process. Not only are many of the individual categorisations oflearning inter-related but they also mutually reinforce each other into either positive,or negative, cycles of experience and effect on IJV performance. A direct conse-quence of this inter-related and inter-dependent learning activity is that better per-formance from learning to manage IJVs may be causally ambiguous, in that directrelationships between facets of learning and performance may be extremely difficultto identify. Unravelling the relationship between learning to manage IJVs and per-formance outcomes is a challenge for future research. Some directions that futureresearch effort may take are identified in the suggested research propositions.

Acknowledgements

The authors would like to thank the journal’s two anonymous referees for com-ments on earlier drafts of the paper.

The work in this paper forms part of an ESRC project An Investigation of theCore Dimensions of UK International Joint Venture Activity with European Part-ners (R000236676).


Appendix

Table A1Categories of lessons learned from interview data

Lesson Total UK partner European IJVpartner management

Culture 17 8 3 6Shared strategic vision 15 7 3 5Issues of operational decision-making 9 2 3 4Anticipating implementation issues 8 5 2 150–50 Relationship 8 3 3 2Trust 8 3 3 2Personal relationship 5 3 1 1Exit strategy 4 3 1 0Clearly identify the complementarities 4 2 1 1Commitment 3 1 2 0Past relationships 3 0 1 2Calculate financial return 2 1 1 0Autonomy for JV 2 0 1 1Avoid JVs 2 1 1 0Issue of JV autonomy 2 0 1 1New competencies 2 0 1 1Surface disagreements 2 0 1 1Learning from partner’s practices 2 0 1 1Inculcate JV perspective 2 1 0 1JV agreement 2 1 1 0Due diligence analysis 1 1 0 0Process of on-going learning 1 0 1 0How to structure the JV 1 0 0 1Avoid faults 1 0 1 0Understand the consequences of the 1 0 0 1negotiationNothing 1 0 1 0Financial strength 1 0 1 0Balanced partnership 1 1 0 0Frustration of seconded managers 1 0 0 1Integrity 1 0 0 1Anticipate change 1 1 0 0Clear definition of what is to be shared 1 0 1 0Appropriate incentives 1 0 0 1Resource availability 1 1 0 0Advice from consultants 1 0 1 0Neutral IJV management 1 0 0 1Even-handed decision-making 1 1 0 0Partner selection procedure 1 1 0 0Understand the partner 1 0 0 1Total 121 47 37 37


Table A2Categories of lessons learned from questionnaire data

Lesson Total UK European IJV managementpartner partner

Shared strategic vision 9 4 0 5Effort to manage different corporate culture 7 1 1 5Importance of good communication 6 0 1 5Agreeing key operational decisions at formation 5 2 0 3Do not underestimate national cultural differences 5 1 1 3Define clear lines of responsibility between 4 1 1 2partners and JV managersNeed more effort to win people over 3 0 0 3Careful selection of senior managers of JV 3 1 2 0Let JV managers manage within agreed plans 3 1 0 2Lessons 50–50 causes severe problems 2 0 0 2Regular review of performance needed 2 1 0 1Nothing specifically new 2 1 0 1Importance of openness and speed 2 1 0 1Lessons early financial commitment necessary 2 0 0 2Takes long time to establish coherent management 1 1 0 0Much easier when JV profitable 1 1 0 0Assumption of successful outcome before contract 1 1 0 0finalised brings operating benefitsUsing strengths of parent company 1 0 1 0Need for structured plan to keep control 1 0 1 0Partner selection by competencies/requirements 1 0 0 1No previous experience—all new knowledge 1 0 0 1Learn to compromise and respect each other 1 0 0 1Initial contingency planning facilitates later 1 0 0 1agreementsEqual power sharing 1 0 1 0Have controlling influence in day-to-day 1 1 0 0managementSimplicity in JV agreement 1 1 0 0Preparedness to change personnel quickly 1 1 0 0Total 68 20 9 39

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