c


Title: MEASURING PERFORMANCE OF INTERNATIONAL JOINT VENTURES

Authors: GERINGER JM, HEBERT L



 

The objective of this article is to test several hypothesis to be able to measure the performance of
IJV and evaluating their effectiveness of different approaches to data collection. The study uses
datasets collected from American and Canadian companies.

The hypothesis used for this study is stated as follows:

HI:There will be a significant positive correlation between objective and subjective measures of
IJV performance.

H2: There will be a significant positive correlation among the parents' and the IJVGM's
assessments of IJV performance.

H3: There will be a significant positive correlation between a parent's satisfaction with IJV
performance and perception by the other partner and the IJVGM of this parent's satisfaction.

H4: Correlation between partners' assessments of IJV performance will be stronger in IJVs
involving parents with similar national cultures.

H5: Correlation between a parent's satisfaction with IJV performance and the perception by its
partner and the IJVGM of this parent's satisfaction will be stronger in IJVs involving parents with
similar national cultures.

 
 

Joint Ventures (JV) are when two or more organizations share in the ownership and responsibility
of a single entity. Responsibilities and decision making processes are shared among the
organizations involved in the JV activities. On the other hand, International Joint Ventures (IJV)
are when one of the parent companies involved is operating outside the country where the JV is
taking place. There has been a dramatic increase in JV¶s over the years since 1981. JV¶s have
become of considerable importance to international business due to their strategic advantage.

Despite the dramatic rise in the activities of IJ¶s, a sizeable number encounter performance
challenges. Estimates indicate that unsatisfactory IJV¶s performance ranges from %37 to %70.




H1: Several methods exist for measuring IJV¶s performance; profitability, growth, cost position,
duration, survival and management stability. These measures are considered to be objective.
The functions of a IJV is not restricted to making profit; IJV can act as a channel for the transfer of
technology, performing Research & Development or access natural resources and raw materials
in that country. As a result of the above, IJV¶s should be measured objectively and subjectively
and the only judges can be the parent company CEO along with the International Joint Ventures
Management (IJVGM). Management tends to be biased towards their company, and they may
be reluctant to disclose negative information that relates to their activities. Consequently, the
initial hypothesis will test the correlation between subjective and objective measures.

H2, H3: The author emphasized the importance that all companies provide sufficient data to help
in the research. However, the author stressed the difficulty on any researcher in the process of
collecting this data. Consequently, a solution for this problem can be reached through the use of
statistics. A new hypothesis test has been included to support that the data from parent
companies will be correlated with the International Joint Venture General Management (IJVGM).

H4, H5: Culture can have a significant impact on the assessment correlation of IJV between
parent Companies and International Joint Venture General Management (IJVGM). The
correlation is more significant as the culture gets closer. Correlation of the assessment increases
when management teams are of identical nationalities. The variations in cultures can result in
different attitudes, values and beliefs. The author cites an example where American and
Japanese cultures are found to be incompatible. This culture gap can result in different
approaches to coordination, operational methods and implementation strategy. Cultures with
similar values tend to have greater harmony amongst the management team members, resulting
in a better venture performance.





H1:Positive correlation occurs within %90 certainty between subjective and objective measures
of IJV performance.

H2, H3:Positive correlation occurs amongst the parent companies and the IJVGM¶s assessments
of IJV performance.

H4, H5:Positive correlation occurs in the presence of cultural similarities.

 

 

The objective of this study was to study the correlation between various IJV performance
measures including objective and subjective. Subjective and objective measures were shown to
be positively correlated Similarities in cultures in management were shown to produce enhanced
performance.




This paper showed the importance of how culture can have a significant contribution towards the
success of IJV¶s. Culture similarities can positively impact the IJV¶s operations and strategy
implementation, which can lead towards long-term stability and success of the ventures. It is
critical for ventures i to set objectives. Those objectives include increasing profitability and
market penetration strategies. It is also vital to set correct performance parameters to aide in
measuring the overall success of ventures.