CONTROL AND PERFORMANCE IN INTERNATIONAL JOINT VENTURES

The authors examine the meaning of control in international joint vent ures (IJVs) and the relationships of potential means of control in suc h organizations to the performance satisfaction of the foreign partner . They propose a conceptual model that provides both a traditional own ership-focused internalization perspective on those issues and an inte grated approach combining a broader transaction cost interpretation of control with a resource input-based bargaining power model. A set of simultaneous structural equations with endogenous explanatory variable s provides multiple possible paths from various resource and power inp uts through different means of control to perceived performance satisf action. In such a model, intermediate variables act both as dependent and independent variables; thus the complex theoretical interactions o f the variables are modeled more comprehensively and realistically tha n in single-equation models. To test the model and compare the theoret ical relationships, the authors used data from a survey of managers in Norwegian multinational firms having at least one IJV. For structural equation modeling with latent variables, they used the LISREL VII pro gram that simultaneously fits the measured variables to the latent var iables and provides a maximum likelihood solution for the structural e quation system. The results clearly reject the traditional internaliza tion approach to IJV governance that relies strictly on ownership shar e to delineate degree of control. However, relative resource input has a strong relationship to relative bargaining of the parent companies, which then drives equity share, control over specific activities, and perceptions of overall control of the IJV. That result supports a bar gaining-power-based model of IJV control. The relatedness of the strat egic resources of the parent and the joint venture also drives specifi c control, implying that although transaction risk is important to gov ernance, governance is provided by specific control rather than owners hip level. Perceptions of performance are strongly and positively rela ted to overall control. Those results suggest that specialized control provides both protection and exploitation of key resource inputs and is gained through increased bargaining power. Higher levels of specifi c control result in a perception of overall control and thereby satisf action with perceived levels of IJV performance among foreign parent c ompany managers. Interestingly, traditional exogenous determinants of IJV control and performance such as government mandates, cultural simi larity, and international experience levels fail to provide significan t effects. Rather, the focus is on endogenous aspects of the parent-IJ V relationship, suggesting that the key to parent firm satisfaction wi th an IJV is control over operations that use key strategic inputs fro m the parent.