Efficient Resources, Industry Membership, and Shareholder Value Creation: The Case of International Joint Ventures

Abstract

This study extends previous work on international joint ventures (IJVs) by investigating the role of industry conditions vis‐à‐vis shareholder value creation in these ventures' American parents. More importantly, the study argues that although industry membership influences firms' economic performance, it is at least as useful to also focus on firm‐level indicators of such membership. This is because firms, even those within the same industry, differ in terms of resources with a potential for creating sustainable competitive advantage. Indeed, the study submits that both levels of factors must be jointly examined to derive a better understanding of shareholder value creation via IJVs. Using a multi‐industry sample of more than 400 equity IJVs, this study demonstrates the interrelatedness between industry structure and resource‐based views. The results of moderated hierarchical regression analysis validate the above‐mentioned thesis and support two of the study's three hypotheses. Résumé La présente étude se propose de pousser un peu plus loin les recherches sur les International Joint Ventures (IJVs). Elle examine l'impact de l'environnement industriel sur la création de valeur pour actionnaire au sein des compagnies mères américaines des entreprises étudiées. L'étude montre que même si l'adhésion industrielle influence la performance économique des firmes, les indicateurs de niveau de cette adhésion méritent d'être pris en compte. C'est que les firmes, y compris celles qui appartiennent à la même grappe industrielle, sont différentes du point de vue des ressources dotées d'un potentiel à même de créer un avantage concurrentiel durable. L'étude soutient que pour mieux comprendre la création des valeurs pour actionnaire par l'entremise des IJV, les deux niveaux de facteurs doivent être examinés ensemble. Grâce à un échantillon de plus de 400 IJV d'actions, cette étude met en évidence l'interrelation entre la structure de l'industrie et les vues basées sur les ressources. Les résultats de l'analyse de la régression hiérarchique modérée valident la thèse susmentionnée et confirment deux des trois hypothèses qui sous‐tendent l'étude.

The impact of home-country conditions and geographical diversification on the domestic productivity of telecom multinationals

“…Firms that operate in large domestic markets usually enjoy greater scale and/or learning economies that enhance these firms' competitiveness. This is because such markets augment market specialization (Behrens et al, 2009) by indigenous firms and facilitate their growth as more efficient competitors (Gal, 2003;Merchant, 2005). Moreover, large domestic markets encourage indigenous firms to make aggressive strategic investments (e.g.…”

“…This encourages firms to innovate (Von Hippel, 1988) and helps them to develop a more sustainable competitive advantage (Fabrizio and Thomas, 2012). Essentially, demand sophistication requires indigenous firms to become more competitivesavvy or, fundamentally, risk their own survival (Merchant, 2005). Indigenous firms may be able to achieve both these imperatives through diversification.…”

“…International diversification also moderates the linkage between home-country industry competition and the domestic productivity of indigenous firms. As some researchers have argued, greater competition in home-country markets exerts upward pressures on indigenous firms to improve their competitive capabilities and bolster productivity growth (Merchant, 2005;Porter, 1990). These pressures (especially) compel indigenous firms to seek and develop more sustainable sources of competitive advantage (e.g.…”

“…Home-country effects are not only substantial in their "gravity" but also persist regardless of a firm's level of multinationality (Makino et al, 2004;McGahan and Victer, 2010). Thus, firms cannot leverage their firm-specific resources in their quest for superior performance unless certain baseline conditions exist in these firms' home countries (Merchant, 2005). Otherwise, all firmseven those in countries with punishing home-country attributeswould, in principle, diversify internationally to gain edge over rivals.…”

Target Costing, Business Model Innovation, and Firm Performance: An Empirical Analysis of Chinese Firms

“…The resource-based view of firms suggests that the competitive advantage and ultimate profitability of a firm lies in the acquisition and combination of unique resources by applying organizational and managerial capabilities (Barney, 1986(Barney, , 1991Grant, 1991;Merchant, 2005;Wernerfelt, 1984). As such, the capability to innovate relative to competitors is crucial (Assink, 2006).…”