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The effect of foreign partner network embeddedness on international joint venture failure: Evidence from European firms’ investments in emerging economies

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  • Meschi, Pierre-Xavier
  • Wassmer, Ulrich
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    Abstract

    Access to trusted information about potential local partners is a critical factor for international joint venture (IJV) stability and success in emerging economies. We build on social network theory and examine how foreign investors can benefit from their alliance networks in accessing reliable information on the availability, resources, and behavior of potential local IJV partners. More specifically, we examine positional embeddedness in networks and network density and how these factors help foreign firms mitigate behavioral uncertainty in IJVs and thus reduce the likelihood of failure. We use data on 349 IJVs formed by 132 European firms in emerging economies during the 1995–1997 period and event history analysis to test our hypotheses. Our findings indicate that having an alliance network is a necessary but insufficient condition to mitigate behavioral uncertainty of local partners. We find that only densely tied networks offer benefits of reliable information on potential local partners that ensure the longevity of IJVs and that a central position in an alliance network translates into lower IJV failure.

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    Bibliographic Info

    Article provided by Elsevier in its journal International Business Review.

    Volume (Year): 22 (2013)
    Issue (Month): 4 ()
    Pages: 713-724

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    Handle: RePEc:eee:iburev:v:22:y:2013:i:4:p:713-724

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    Related research

    Keywords: Alliance networks; Emerging economies; Event history analysis; International joint ventures; Network density; Positional embeddedness;

    References

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    1. Kogut, Bruce, 1989. "The Stability of Joint Ventures: Reciprocity and Competitive Rivalry," Journal of Industrial Economics, Wiley Blackwell, vol. 38(2), pages 183-98, December.
    2. Seung Ho Park & Michael V. Russo, 1996. "When Competition Eclipses Cooperation: An Event History Analysis of Joint Venture Failure," Management Science, INFORMS, vol. 42(6), pages 875-890, June.
    3. Bruce Kogut, 1991. "Joint Ventures and the Option to Expand and Acquire," Management Science, INFORMS, vol. 37(1), pages 19-33, January.
    4. Bruce Kogut & Harbir Singh, 1988. "The Effect of National Culture on the Choice of Entry Mode," Journal of International Business Studies, Palgrave Macmillan, vol. 19(3), pages 411-432, September.
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    9. Vanhaverbeke, W.P.M. & Gilsing, V.A. & Beerkens, B.E. & Duijsters, G.M., 2009. "The role of alliance network redundancy in the creation of core and non-core technologies," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3295984, Tilburg University.
    10. Reuer, Jeffrey J. & Zollo, Maurizio, 2005. "Termination outcomes of research alliances," Research Policy, Elsevier, vol. 34(1), pages 101-115, February.
    11. Meschi, Pierre-Xavier & Riccio, Edson Luiz, 2008. "Country risk, national cultural differences between partners and survival of international joint ventures in Brazil," International Business Review, Elsevier, vol. 17(3), pages 250-266, June.
    12. Yamin, Mo & Golesorkhi, Sougand, 2010. "Cultural distance and the pattern of equity ownership structure in international joint ventures," International Business Review, Elsevier, vol. 19(5), pages 457-467, October.
    13. Yadong Luo & Oded Shenkar & Mee-Kau Nyaw, 2001. "A Dual Parent Perspective on Control and Performance in International Joint Ventures: Lessons From a Developing Economy," Journal of International Business Studies, Palgrave Macmillan, vol. 32(1), pages 41-58, March.
    14. Anna Nadolska & Harry G Barkema, 2007. "Learning to internationalise: the pace and success of foreign acquisitions," Journal of International Business Studies, Palgrave Macmillan, vol. 38(7), pages 1170-1186, December.
    15. Aimin Yan, 1998. "Structural Stability and Reconfiguration of International Joint Ventures," Journal of International Business Studies, Palgrave Macmillan, vol. 29(4), pages 773-795, December.
    16. J Michael Geringer & Louis Hebert, 1989. "Control and Performance of International Joint Ventures," Journal of International Business Studies, Palgrave Macmillan, vol. 20(2), pages 235-254, June.
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