Many international joint ventures are unsuccessful, and managers partly blame the "softer" issues related to partner relationships. The authors study these relational (behavioral) aspects of the formation process using seven international joint ventures involving Australian and Malaysian firms. During the five stages of formation (i.e., need determination, partner search, partner selection, negotiations, and operations), four dimensions of trust (i.e., personal, competence, contractual, and goodwill) and three dimensions of commitment (i.e., intentions based, contractual, and affective) play prominent roles. Managers need to focus on these dimensions during the five stages of formation to improve chances of success.
Although International Joint Ventures (IJVs) suffer from a relatively high failure rate, they represent an increasingly important aspect of international business. A major criticism of the IJV literature is that it lacks a comprehensive framework for understanding the formation and maintenance of IJV relationships. It is suggested that this is due to the reliance on transaction cost theory and resource dependence theory that alone are not able to fully explain IJV relationship formation and maintenance. Drawing upon research in the buyer-seller and channels literature, the authors apply relational exchange theory to highlight important relational variables that are likely to impact IJVs. The political economy framework is then used to develop an integrative framework of IJV relationships that include these key relational variables. Implications for managerial action and future research are discussed.
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